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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, June 5th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. As you might be able to tell by my voice, allergy season is in full swing as I am experiencing a little bit of an allergy relative to cottonwood trees. At the same time, it is exciting because we know that summer is approaching very, very quickly in the next two weeks. Also on a fun fact basis, today is National Donut Day. So those of you that are fans of donuts, be sure to have one at your favorite establishment. Mine happens to be chocolate frosted. 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, and maybe even their favorite donut. 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 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. 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 have 4 economic releases to share with you today, beginning with some production-oriented information, and then we'll cover it on the employment side. So first up, according to the Institute for Supply Management, the manufacturing index came in an expansionary category for 54 as they're reading up from April. So May pretty constant at 54, and this was the 5th consecutive month of expansion. Now this continues to be good news. That is the highest reading since May of 2022 and if you recall us from previous podcasts over the years, the manufacturing side of the economy had been in contraction for almost five years. So having 2026 show 5 consecutive months in terms of manufacturing is pretty good. On the services side of the economy again came in at 54.5 which was the 23rd consecutive month of overall expansion and this continues The roughly again five-year run on this side of the economy where services has been expanding for that considerable amount of time. And second, we have Wednesday's report which came out known as the Beige Book, which is the Federal Reserve's report for activity across the 12 districts in advance of the upcoming Federal Reserve's Federal Open Market Committee meeting on June 16th and June 17th. The report showed that economic activity increased at a slight to moderate pace for 10 out of the 12 federal districts while one district reported a slight decline and one reported no change. Now what's interesting to me is the last few months that we've been reporting this information it seemed to be like a 50-50 split and now it's getting a little bit better to 10 out of 12 districts showing increased or slight to moderate pace of economic activity. On the consumer side, there is evidence that higher-income households remain resilient and less sensitive to the price inflation increases, while middle-income households and lower-income consumers showed greater financial strain. Some of that financial strain shows itself in increased use of credit cards as well as fewer retail visits and stronger demand for necessities. And third, earlier in the week we got the JOLTS report from the Bureau of Labor Statistics, which is the Job Openings and Labor Turnover Survey report, which showed for April the job openings part of that report came in at 7.6 million job openings from employers, which was up from the prior month's 6.9 million. And finally, or 4th, the report that came out just this morning at 8:30 (AM EST) was probably the bigger news item for the week and that is the employment situation where we get new non-farm payrolls and the unemployment rate. For the month of May, there were 172,000 new non-farm payrolls created in the United States and the overall unemployment rate remained unchanged from the prior month at 4.3%. So the 172,000 new jobs was a greater number than expectations. And in addition, if you look back, the revisions for the months of March and April were revised up in a positive way with 93,000 more jobs than originally expected in the original release. Now this is one of the few times that I can remember that the revisions have been staggeringly positive. On most occasions there's a little bit of negative revision. So all in all, 172,000 new jobs for the month of May in the preliminary estimate, plus revisions on the positive side, showcase a pretty strong report here on the employment picture for the month of May. So let's get right to Steve for our opening conversation where we'll get a little bit of a recap on this week's news on Iran and what's going on with oil and then dive a little bit deeper into what's going on with the markets. So Steve, what are your thoughts?
Steve Hoedt [00:05:16]
Well, Brian, it's been another week where the markets have largely ignored what's been going on in the Middle East. And there have been some interesting developments. When you look at the number of cargo ships that have crossed through the Strait of Hormuz. Do you have any idea what the number was this week?
Brian Pietrangelo [00:05:40]
I don't know, like 10.
Steve Hoedt [00:05:42]
Actually, yeah, it's like 10. It's like 2 boats per day, right? So effectively, we're at the same level of crossings that we were on March 15th in the middle of this situation over there. So really there's been no fundamental change in terms of the impact on global markets from all the machinations that have been going on behind the scenes between the administration here in the US and the regime in Iran. So there's been some news this morning that there were some warning shots fired at some US destroyers. The CENTCOM is saying that no, there weren't shots fired. So who knows exactly what's going on over there. I think that the real thing for the markets is to focus on when and if are there going to be some more oil and gas getting to market. And right now it seems still not. I think that where we'll start to see this is when we get deeper in the summer and we get closer to what commodity market observers call the bottom of the barrels. So essentially the world has been drawing on inventory levels over the last two to 2 1/2 months in order to smooth out the disruptions that have come from shipments from the Middle East. And we're getting to levels where operationally speaking, it could start to cause some stockouts in various global energy supply chains. So that'll be interesting to watch as we move through the summer. Are we really going to get to those levels? And then what's going to happen when we do? I think that could impact economic activity, obviously, if we start to see things like diesel fuel or jet fuel get so tight that you have to start to see flight cancellations or you see other types of traffic get rerouted, things like that. So it's going to be very important to pay attention to, but largely the market has chosen to ignore this. And from an equity markets perspective, the market basically believes that this was over the day that the ceasefire was declared.
Brian Pietrangelo [00:07:58]
Great updates, Steve. Thanks for bringing our listeners up to speed on that. And let's pivot back to some activity that happened during the market this week.
Steve Hoedt [00:08:05]
Yeah, so the markets had a couple different things going on. So we've started to see the first kind of cracks in some of the AI trade here in the last couple of days. So And I'll mention a couple of stocks, one of them domestically, one of them internationally. So yesterday, Broadcom had reported earnings the night before and had mentioned that their guidance for 2027 was going to stay the same. They're the largest maker of custom silicon for the AI trade. So it made people kind of go, and you saw their stock sell off. But not only that, it kind of impacted the whole broader ecosystem for AI. And you saw a very, very large rotation. In fact, one of the largest performance differentials in the last 15 years in daily trading between technology and financials. So you saw a huge rotation between those two areas in the last day. And then overnight last night, we saw SK Hynix, which is one of the largest makers of memory in South Korea, one of these companies that's been driving this incredible performance in the Korean Kospi index for our listeners. They're down 10% in trading today, talking about similar, there are some similar issues with them. So, you know, here's like the first two kind of things that we've seen over the last few months that are making people, at least from an investment perspective, start to question the legs underneath this AI thing. And then on top of that, we've got the largest IPO in the history of planet Earth coming next week with Space Act. And you've got market participants trying to prepare to figure out how to handle that.
Brian Pietrangelo [00:10:05]
Steve, we began talking about it two weeks ago, and we're going to talk about it today and then next week when they actually launch, pun intended. And so has there been any update on pricing or what the overall look is?
Steve Hoedt [00:10:17]
So we did get pricing indications. They're looking to price the deal at $135 a share. So kind of, we had ballparked the range at 125 to 150. So they narrowed that down. And so we were in the range. So they're going to price it at a $1.77 trillion market cap. They're going to raise about $75 billion in the offering. And all indications are that it's going to be oversubscribed. So we'll see how this goes next week. Talking with some strategists that I value on Wall Street, it sounds like the source of funds for this is going to come from two different places. One, a lot of managers have been letting cash inflows build up here on a very near-term basis. So, just from a market plumbing perspective, when investors put capital into a fund structure, the fund manager would typically put that capital to work on the day that they get it. Now what we've seen over the last few weeks is instead of putting that money to work immediately, the fund managers have been letting it build up in cash so that they'll have cash in reserve to be able to go in and put a position on. That's much less disruptive. from a market perspective than if they had to sell something to buy something. The other thing that we do think is likely to happen, though, is that as we get these mega cap IPOs, and I'm not just focusing on SpaceX next week, but we've got two more likely over the course of the summer with OpenAI and Anthropic also in the pipeline here. And those are the two largest AI vendors in terms of a product, I would I think that you're going to see some rotation out of some of the MEGs, Devon, mega cap tech names in order to fund this. That to us is really the likely the likeliest market impact that we're going to see where that can cause problems for the S&P 500 is that 40% of the market is still tied up in these mega cap names. So any rotation out of it selling pressure at all will cause problems for the headline index for the S&P 500. So don't be shocked if it's difficult for the S&P 500 to make headway over the next two or three months as we move through the typical summer doldrums period as we see these IPOs come out and we see some capital rotate.
Brian Pietrangelo [00:12:53]
And Steve, maybe it'd be helpful for our listeners if you could talk a little bit about how a stock like this post IPO gets included in an index.
Steve Hoedt [00:13:02]
Sure. So it's been really… The rules are changing, let's put it that way. So the index providers, whether it's NASDAQ, Russell or S&P, all have sets of rules on how things get included. And they include things like seasoning, meaning how long it's been public, liquidity, how much of the float is actually available to trade, and then, oh, wait, profitability for some of them. Russell and the NASDAQ have both changed their rules or waived rules to make it so that there's a fast track for inclusion for these large mega cap IPOs. The S&P announced in the last couple of days that they are not going to change their rules. The S&P ones have a profitability focus in them. And basically, if you're not profitable for the four quarters prior to inclusion, you're not going to be included. So that's going to keep these stocks on the outside of the S&P 500, but they will likely be included in the Russell 1000 index. And for sure, they're going to get included in the NASDAQ 100. So there's not as much in terms of ETF flows tied to the NASDAQ 100, just the triple Qs, which people which people trade. It's much more of a trading vehicle than it is an investment capital vehicle. Russell, though, is a different story. There are a lot of managers in the large cap land who are tied to the Russell 1000. And so there will have to be some buying pressure there. But I have to say, I'm very happy they didn't include it in the S&P 500 and changed the 500 rules to me that the elimination of the profitability constraint on inclusion in the 500 would have been a bridge too far.
Brian Pietrangelo [00:14:56]
Steve, two final questions for you. We've talked about a lot in the past, but it's quieted down a bit this year recently, but what are the trends you're seeing in gold? And then we'll finish with your favorite donut. I don't think you're a donut person, Steve, but what is it?
Steve Hoedt [00:15:10]
Well, my favorite donut would be Timbits, but we're not going to talk about that. And that's for Tim Horton's, for those of you who don't know. But I would tell you that From a gold markets perspective, we've continued to see backing and filling here. And honestly, it wouldn't surprise us a bit if we were to see this backing and filling push us all the way down toward 4,000 as we head through the summer. Things have really come off the boil there. It's not something that we see a lot of inbound questions on anymore. Six months ago, everybody was gold, gold, gold. And now it's now nobody cares about gold. Now everybody's talking about SpaceX. There's probably a clue for market participants there or our listeners to think maybe if nobody cares about gold and everybody cares about SpaceX, I should be buying gold and I shouldn't be buying SpaceX. But I think that that's one of those things where we think that gold has a pretty good long-term outlook over a multi-year period from here. But we got really cooked off to the upside on that parabolic move earlier this year that we talked about. Parabolas don't always end well. This one has now moved sideways to down. That's long-term a positive thing, but I wouldn't be surprised at all to see 4,000 by the end of the summer. Great.
Brian Pietrangelo [00:16:33]
Thank you, Steve, for that fantastic update. And we'll start with Rajeev and come right out of the gate with your favorite donut, and then we'll move to things like Federal Reserve policy.
Rajeev Sharma [00:16:42]
Oh, the donut question is probably easier. I do think that my favorite probably be a coconut crunch. donut that goes very well, pairs very well with English breakfast tea. So that's probably what I would go with.
Brian Pietrangelo [00:16:53]
Outstanding!
Rajeev Sharma [00:16:54]
But if we talk about the markets, you know, we got those job growth numbers. They topped all the forecast in May, seeing the strongest three month advance that we've seen in more than two years. You have a labor market that is firming up that boosts the bets now that the Fed will consider a rate hike this year to contain inflation. So the Fed will start really squarely focusing on inflation. We see the immediate impact on the yield curve with Treasury selling off. The two-year was up about nine basis points right on the jobs report. We have a yield there on the two-year around 4.13%. If you look at interest rate swaps, traders are now fully pricing in one rate hike by the end of the year. So with labor markets not really a concern, again, the Fed is going to be focused on inflation, and so that puts the traders to start pricing in about 24 basis points of hikes by October and 41 basis points of hikes by the end of April next year. A week ago, we saw the markets pricing in about 25 basis points by March of next year. So things have changed pretty quick. Now you also have Kevin Warsh, the new Fed chair. He's gonna be coming in, having his first policy meeting on June 17th. No one really expects the Fed to do anything at that meeting, but you could see a signal from the Fed that More officials are leaning towards a rate hike. That being said, most investors expect Kevin Warsh to sound pretty neutralized first press conference. There really is no urgency for the Fed to do anything at this Fed meeting, but we will see some of economic projections. It'd be very interesting to see how many dissents we have with the policy statement that comes out that day. And if you keep all this in mind, you have treasuries moving through breakout levels right now. You have yields on the 10-year, they've moved to 4.5%. That's the midpoint of where we were in May. You have no buyers really coming in and stepping in right now. So we could see higher yields ahead. You could see some pressure to keep yields higher where we are right now. And the other part of the fixed income market that I focus on is the credit spreads. We did see some modest widening this week. Investment grade spreads were wider by about a basis point. Yield is wider by about two basis points. So really nothing terrible happening in the credit markets right now. We still remain at multi-decade tights, and the new issue calendar is doing very little to dent that picture. And we've seen a lot of new issuance in investment grade, and these new issues are getting placed. They're doing well. There just continues to be inflows into the investment grade market. And with those inflows, you're going to see, again, investors looking for those high quality names at very decent yields right now. So junk bond spreads, we're at near historic tights. Leveraged loans have climbed above pre-Iran war levels. This is important because it shows the market sentiment. And credit markets have remained resilient during the Fed's last tightening cycle. The biggest risk I see right now for investors in the credit markets would be some kind of stagflation that might happen. But if you look at where spreads are, I don't think that fear is really there yet. And I really do think that as long as the new deals do well, as long as there's liquidity in the credit markets, I think that, you know, investors continue to pour in to try to find those higher yields that they've not seen for a while. And you're again talking about blue chip companies that are giving you a close to 5% yield. It's very hard for investors to not get excited about that.
Brian Pietrangelo [00:20:19]
Yeah, Steve, sorry, Rajeev, when we're talking about the Fed, next week we'll get CPI report, then we have the Fed meeting, and then after the Fed meeting, we'll get PCE report in terms of inflation. It's very hard to think about a scenario in which they could cut rates. What do you think would have to happen? Iran war would get wrapped up, oil would come down, then maybe the trimmed mean version of inflation instead of the normal version of inflation. What are your thoughts on what would have to occur?
Rajeev Sharma [00:20:46]
Yeah, it's a very good question, Brian. And I really do think that a lot of those factors that you mentioned would have to happen. But again, even if the Iran war ends, The impact that's going to already have on inflation, I think that's still going to keep rates higher, kind of keep rates around where they are right now. Again, I don't see the Fed having a lot of catalyst to start cutting rates. Big, big change in market expectations from the start of the year where many investors are thinking five to six rate cuts this year. That didn't happen. I can't imagine the picture getting so great that the Fed starts thinking about cutting rates again. At most, you could just see higher for longer.
Brian Pietrangelo [00:21:25]
Final question for you, Rajeev, is that there's private credit in the news again, but it doesn't seem to be affecting the public credit in terms of the credit spreads that you just mentioned. Do you see any carryover or any nervousness in the public markets?
Rajeev Sharma [00:21:39]
You know, the biggest nervousness that I think that's there right now, I mean, you're absolutely right, private credit was a big story a couple of months ago. You did see spreads start to gap out a little bit in the public markets. Right now, I think the biggest fear in the public markets right now is no longer really private credit at this point. I think it's more about complacency in the market. If you're seeing spreads at these multi-decade tights. Is the market missing something? And I think some investors are starting to really pick and choose where they want to be in the markets right now. Do you really want to go down the credit spectrum to pick up a few basis points of yield? I don't think you do. High yield has obviously been more impacted by private credit and some of the woes that we saw in private credit. But I do still see that high yield has outperformed investment grade all year. And I think a lot of that has to do with the shorter duration of high yield. I think that's helped the high yield markets. The lack of new issuance in the public markets for high yield has also helped high yield markets. But where we sit, I really don't think it makes a lot of sense at these levels to really start playing with those lower quality names because private credit obviously has a way of poking its head up again. And there are still jitters out there in the market about private credit. So I really do think that right now the market's focused on trying to be the upping quality trade.
Brian Pietrangelo [00:23:02]
Well thank you for the conversation today, Steve and Rajeev. We appreciate your perspectives. And before we close the podcast, our final reminder for our upcoming National Client Call on June 9th, Tuesday next week at 1 P.m. Eastern and 10 A.m. Pacific, we will be going over our mid-year economic and market outlook from the Chief Investment Office covering geopolitics, artificial intelligence, inflation and interest rate, and the equity markets and the consumer. So if you haven't received an invitation, please reach out to your relationship manager, see if you can get that invite, and be happy to have you join us. Again, national call Tuesday, June 9th at 1 P.m. Eastern, 10 A.m. Pacific. So as always, thanks to our listeners for joining us today and be sure to subscribe to the Key Wealth Matters podcast through your favorite podcast app. And we consistently remind folks that past performance is no guarantee of future results and we know your financial situation is personal to you. So reach out to your relationship manager, portfolio strategist, or financial advisor for more information and we'll catch up with you next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.
Disclosure [00:24:18]
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