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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.
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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, January 30th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. As we look into next Monday, we come up on Groundhog's Day, which good old Punktutawney Phil will give us his interpretation and reading on whether we're going to have six more weeks of winter. We might want to ask him if we're going to have six more weeks of persistent inflation as well, if not longer than that, given where we've been in a sticky situation with inflation for some time now. 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, 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 news, we've got a very light economic calendar this week, but we'll give you 3 quick updates and then we'll get on to three other conversation topics for our podcast today. First up, the weekly initial unemployment claims came in at 209,000 for the week ending January 24, 26, which is very stable and has remained stable for roughly the last two years. So this is good news on the employment front that this number continues to stay low. And second, productivity for the third quarter final estimate for 2025, Q3 came in at 4.9% for productivity for the quarter, which is very strong and is a good sign for the overall productivity in the overall business environment. And third, inflation came in from a reading of the Producer Price Index, or PPI, and it came in for the month of December at a 0.5% month-over-month clip, which was higher than expected. So we'll see if this stickiness in inflation at the PPI wholesaler level flows into both personal consumption expenditures measure of overall consumer inflation. As for other events this week, it appears that the government shutdown has been averted with some funding on a temporary basis from both sides of the aisle, so we'll continue to watch that as we go through the next few months. We'll also talk with Steve about Q4 earnings and some tech reports that we got this week. We also had the Federal Open Market Committee meeting this week on this past Wednesday, which we'll get Cindy's take on it. And more importantly, we've got a new Fed chair coming up to replace Chair Powell, which we'll discuss with our panel. So let's get right to it with Cindy Honcharenko and give us a recap, Cindy, on what happened at the Fed meeting and press conference this week. Cindy?
Cindy Honcharenko [00:03:06]
So the Federal Reserve held the federal funds rate unchanged to 3.5 percent to 3.75 percent. This decision reflects a pause after prior easing, but not a signal of imminent cuts to come. The vote was not unanimous, with Governors Stephen Miran and Christopher Waller dissenting in favor of a 25 basis point cut. Notable changes in the statement were that the committee softened the labor market language and acknowledged signs of stabilization. There were references to downside risks to employment, and those were toned down. Inflation language remained cautious and still described as somewhat elevated. But the overall tone shifted from watching for weakness to waiting for confirmation, reinforcing a pause rather than a pivot. Moving to the press conference, Chair Powell reiterated that the current policy stance is appropriately positioned after earlier cuts. He also noted that there's no preset path for rates. Decisions will follow incoming economic data. Inflation is cooling, but remains above target and labor markets are more balanced. And that the Fed remains independent and focused on its dual mandate. So what are the likelihood of rate cuts in 2026? Right now, the markets are pricing fewer cuts with low odds in early 2026. It's looking more like midyear, June or later is the possible, the earliest plausible window. Expectations center on one to two cuts at most, but not a full easing cycle. And with Fed Chair Powell on his way out as chairman, it's a very low likelihood of additional cuts while he remains chair, which is through May, 2026. Powell did emphasize patience and data dependence despite internal dissents. And any further easing, like I said, will likely happen in 2026, potentially under new chair. Kevin Warsh. George, Rajeev, look forward to hearing what your take is from the FOMC meeting and Kevin Warsh's appointment announcement today.
George Mateyo [00:05:30]
So, Cindy, I don't know if the FOMC meeting that took place this week is the least relevant meeting of all time, but it sure seems like it's already kind of old news. Your description was amazing, as always. I do think it's important to recognize before we leave that point, though, that The Fed did seem to suggest rather that the overall economic story is still solid, the overall growth is still pretty healthy, so the economy by their lights are still pretty good. The labor market, I think they upgraded, but I'm not sure if that's a little premature in the sense that just I think a few hours after the Fed talked about the labor market being on solid ground, we saw a couple of big announcements from some corporates that suggested layoffs might be rising. We'll have to pay attention to that, as always, where the labor market continues to be probably the linchpin for what happens next with the Fed. But I think turning maybe to Warsh, I think it is fair to say that he's a dove today, and every person that comes into that role usually is a dove when they first assume the chair, meaning that rates probably in the near term are still biased to the downside. But we still have to keep in mind, again, that the overall committee is the one that makes the decision. So in other words, it's not going to be one person's decision with respect to interest rates overall. he's been a Fed critic in the past too, which is kind of interesting. And I guess we have to kind of take him in his word for that. Although if I'm being honest, I'm not sure exactly what he means when he talks about overhauling the leadership and kind of redoing the Fed. That has a lot of implications that probably deserves a longer conversation, but I'm not exactly quite sure what that might look like. But in the near term, I think he is probably more supportive of lower rates. We'll see how that plays out as we get through the rest of this year and in the next year if inflation stays a little bit buoyant. He's been one that talks a lot about deregulation, which would probably be another theme of the presidents that we also talked about as being a positive for the economy. And I think the third thing I would probably have our listeners recognize is that usually when somebody takes over this role, markets tend to react. It's kind of interesting to see that just in the short term today, of course, we're starting to see the stock market weak at the margin, bond prices are also weaker a little bit. But more importantly, I think what I've observed in my history of watching markets is that usually there's some type of accident that happens. And it's not because of the Fed, but it usually tests the Fed new chair when he or she usually takes over. And we've seen that with Greenspan, we saw that with Bernanke, we saw that with Yellen. It's interesting to see how the market, within about a year's time or so, maybe sometimes less, sometimes tests the new Fed chair. And I'm not predicting that this time, but I think we have to be open to the possibility that at some point we might actually again see the Fed chair being tested. And we'll have to see what that means for Warsh. I mean, he's been around the seat for a while. He was, of course, at the Fed. when Bernanke took over in 2006, I believe. So I think we have this moment in time that, again, maybe a year from now, we're thinking back about this. Maybe we won't, but I think it is interesting to put that into context in terms of what happens when the Fed share transitions in the past as it's done. So that's my take. Rajeev, over to you. Any thoughts you want to add or anything else you're observing in the bond market?
Rajeev Sharma [00:08:33]
Well, I think these are all really, really good points that Cindy and you, George, have made. Couple of things. I thought it was interesting. I know that the Fed statement that came out, nobody really expected a rate cut at this January FOMC meeting. But I thought it was interesting that the Fed acknowledged that unemployment is normalizing. They removed that language that Cindy talked about, downside risk to unemployment that had elevated. They removed that language. They also acknowledge that inflation is somewhat elevated beyond their 2% goal, but the statement itself kind of cooled down some of the heat on both sides of the Fed's dual mandate. It was also interesting to see the dissents. There were less dissents at this meeting than there were at the December FOMC meeting. Cindy mentioned Steve Miran was one of them. He was calling for 25 basis points of rate cut at this meeting, the January FOMC meeting. But the last time at the December meeting, he was calling for 50 basis points of rate cuts. Temperature cooled down with this statement. If you look at the current makeup of the Fed, you would still need four more voting members to vote for a rate cut. So that's gonna be a challenge. So what that does do is knowing that you would still need four more people to vote for a rate cut, that takes March off the table as well. So everybody's now expecting March to not have a rate cut. It re-emphasizes the mid-year being the first rate cut that we may see. Odds right now are favoring June or July as being maybe the first rate cut for 2026. And if you think about the Fed meeting this week, to me, it felt more like the Fed was mark-to-marketing their statement. The market had not really moved too much right after the statement was released. The immediate market reaction was pretty muted. And I think that's a very good thing, actually. It's good that the market did not react and expect that we're gonna get aggressive rate cuts or expect that March is on the table. The market is pretty pleased with the way the statement read. The market also didn't get any real big surprises from the press conference either. Now, as far as Kevin Warsh goes, former Fed governor, for a long time considered an inflation-fighting hawk. But now, more recently, he's pretty aligned with President Trump on having more aggressive rate cuts. And what the nomination signals is further questions about central bank independence. And it does open the door for policy risks. Policy risk has often been cited as one of the key risks for 2026 and beyond. And I do think that this does open that door further for policy risks with easier monetary policy. Even if Kevin Warsh was considered a hawk before, that's what they consider him now. The markets were already concerned about higher political risk premia, less predictable policy. This also opens the door for preemptive rate cuts. So the initial market reaction that we've seen, as you mentioned, George, hasn't been significant today, but we did see some more steepening of the Treasury curve. So investors are anticipating looser policy going forward. So we do see the front end, which is most influenced by central bank policy, monetary policy. We do see front end yields dropping slightly. And we see longer-term yields being pretty anchored where they are. Overall, though, it's very important for everyone to know that Warsh is going to have to forge some kind of consensus amongst Fed governors. Several of those governors are still aligned with the data dependency house-style monetary policy. So data dependency doesn't go out the window yet. This could probably lead to more dissent than we've seen in the past and less predictable forward guidance.
Brian Pietrangelo [00:12:00]
In addition to that, Rajeev, everyone's going to talk about the Warsh appointment, but let's not forget Stephen Miran's appointment was temporary and ends tomorrow. So let's figure out if he's going to get reappointed, which I think he probably would. And that is also the balance of the Fed governorship. Any comments?
Rajeev Sharma [00:12:16]
Yes, I do think that's a very interesting point, Brian, because I do think I also agree that I think he's going to be reappointed. He made his narrative pretty clear throughout his time. to his limited time that he's had so far with his voting capability. He's often asked for aggressive rate cuts, 50 base point jumbo rate cuts. I do think that that does influence, if he's reappointed, that you will have that one more voting member that's going to push for aggressive rate cuts, and maybe even those preemptive rate cuts that we haven't seen in the past.
Brian Pietrangelo [00:12:47]
Yeah, he's that low dot on the dot plot, self-admitted, so we know who he is. So thanks, Rajeev, Steve, and George, or Rajeev, Cindy, and George, a great update on all that content. Now let's turn to Steve and get his thoughts on the stock market this week. We've got a couple of big tech earnings and some other activity, including some AI news. Steve, what's on your mind?
Steve Hoedt [00:13:05]
Yeah, you know, Brian, the tech earnings came in good enough, and we continue to see the forward earnings line for the S&P 500 head up and to the right. And you know, that's Kind of in our mantra, you've heard us repeat on these calls over and over and over again, which is as long as the earnings number continues to go up into the right, it's difficult to get very bearish on the stock market, no matter what's going on in terms of the news flow from the Fed or out of DC or whatever. So, it's been good from that perspective. There definitely is some bifurcation, though, that's happening in the mega-cap tech earnings. And you saw that with the market responding favorably to what Meta talked about with their spending plans and seeming to be able to monetize some AI, while Microsoft, on the other hand, didn't spend enough for the market. And the market participants started to question what's going on there. I mean, then Apple had good numbers out last night. So, we're off to a pretty good start with the mega cap numbers that came out this week. We get the balance of them X Nvidia next week. So we'll have to see how it goes. But so far, so good. And I think that was really kind of the bar. People have to understand that the bar was pretty high coming in this quarter and the numbers are coming in at a level that exceeds that high bar. So good good Q4 numbers. When you think about where the market sits today, this week has been a week of churning. We've continued to churn below the all-time high levels that we made a couple of weeks ago. Don't see anything really nefarious going on under the hood, irrespective of the bouncing around that we're having today in response to the Fed news. I think most market participants have come to this idea that no matter how hawkish the Fed stuff is talked about, the Fed chair is always a dove when push comes to shove. So, I think it was also interesting to hear George reference the challenges that every Fed chair since Greenspan has had. And I think he's being charitable about them maybe not causing it, because I think if you go back and you look at some of the stuff that caused the market gyration, shall we say, it was oftentimes confusing messages that came out of those Fed chairs. So, it'll be interesting to see if we get the same kind of stuff this time, but that plays right into our... our 2026 outlook, Brian, where we talked about how it was going to be a solid first half of the year. And then once you get into the second-half of the year with the new Fed chair, kind of all bets are off. And I think that that's still kind of the scenario that we see in front of us here, where you've got this run hot economy that looks like we're on a pretty solid glide plane for half one and half two with a new Fed chair. Who knows what we're going to get?
Brian Pietrangelo [00:16:09]
Great reminder for our listeners, Steve. Thanks for that, especially on the outlook. George, any final comments for our audience today?
George Mateyo [00:16:18]
Well, there's a lot to chew on there. We covered a lot of ground in the last 15 or so minutes, Brian. So thanks, Cindy, Rajeev, and Steve for all your great insights. I guess I would just echo what Steve said too, where I think you wouldn't be surprised to see some continued churn, some continued volatility. We still think that it makes sense to be basically neutral towards your risk positioning, meaning overall, we're not advocating for getting too far on the risk curve, but we do think there's opportunities inside the market too. And Steve talked about the fact that we've seen, frankly, a little bit of discernment amongst the AI trade. That's one thing we've also signaled in our outlook, where we don't think that it's going to be a rising tide lifts all boats. And we're also seeing the broadening of the market take over as well, meaning that there's going to be more participation beyond just seven stocks that dominate the headlines. And we're starting to see that kind of play out in our portfolios. And so the third thing, Brian, I'm close with, I think as this market continues to maybe churn a little bit to Steve's term, I think quality is going to be an enduring theme. Quality is one of those factors, frankly, that didn't do so well last year. We saw a lot of the low-quality companies rise to the top that really kind of drove some certain market segments of the market. But I think more discernment is going to be a good thing for the market, and more quality participation in the market would be good too. So I would stick with quality, and I would also continue to bet in human ingenuity as a long-term benefit to portfolios and the economy as well.
Brian Pietrangelo [00:17:35]
Well, thank you for the conversation today. George, Steve, Rajeev, and Cindy, we appreciate your perspectives. And as one additional reminder for everybody, please take a look at key.com/wealthinsights for our 2026 Economic and Market Outlook written document that gives you our perspective on what we think is going to happen during the year. It's quite robust and will give you a lot of insight. So if you haven't taken a look at that, please take a look at that as well. It'll be very informative for you. Well, thanks to our listeners for joining us today, and 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 them next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.
Disclosure [00:18:32]
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.