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 9th, 2026. I’m Brian Pietrangelo, and welcome to the podcast. I would like to welcome all of our listeners back to the podcast and wish a Happy New Year, as this is our first podcast of the year after being off for the past three weeks for the holidays. So welcome back, everybody. Happy New Year. 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, and Rajeev Sharma, Head of Fixed Income. As a reminder, a lot of great content is available on key.com/wealthinsights, including updates from our Wealth Institute on many different subjects and especially our Key Questions Article series addressing a relevant topic for investors. In addition, if you have any questions or need more information, please reach out to your financial advisor. Taking a look at this week's market and economic activity, we're going to give you a summary of the updates in two parts. Part 1 is some of the data that came out in December between our last podcast in the middle of December and today. So we can bring you up to speed and then Part 2, what are the economic releases and market news for this past week? Starting with Part 1, we've got 3 updates for you since our last conversation in the middle of December. As a reminder, #1, the Federal Open Market Committee, did cut rates by 25 basis points, taking the Fed funds rate to 3.5% to 3.75% as the range. That caps off 3 consecutive months of 25 basis point decreases for a total of 75 basis points of decreases in the Fed funds rate during the calendar year of 2025. Back on the 10th of December, the Fed also provided their summary of economic projections, which are in a few key areas. One, they upgraded a little bit the real GDP estimate for the end of the year, as well as for 2026. Unemployment rate was basically the same. Inflation was receding. So overall some pretty good news in terms of their projections, but right now they're just projections. Most importantly on their projection for their own committee, they estimated that there would be only one rate cut in 2026 of 25 basis points. We'll have more discussion with that with Rajeev later on in the podcast.
And second, the first estimate for the third quarter of 2025, real GDP from the Bureau of Economic Analysis as it was delayed by the government shutdown, only came out from December 23rd, which was delayed quite a bit. The report showed some pretty strong numbers that were 4.3% on the quarter basis for the third quarter of 2025, which was above the prior two quarters. And so we saw some significant growth a little bit tempered by net exports, but also showed some increases in consumer spending as it is the lion's share of GDP in the United States. So overall a pretty healthy read on the GDP number. Now the revisions will also be delayed due to the government shutdown as we begin to catch up things on the release schedule as we move into 2026, but again, we'll give you that update when we have it.
And third we also got the consumer price index measure of inflation report that came out back on December 18th. Now a couple of things to note that are very important. First and foremost, the October read was not collected by the Bureau of Labor Statistics due to the government shutdown, so that's going to skew the numbers a little bit. And then the November numbers were really a two month number rather than a one month number, but it was a .2% increase on a month over month basis. So a little bit decent, but again taking with a grain of salt. In addition, what that means is for the year over year calculations, the November 2025 number came in at 2.7% inflation for all items and 2.6% for core inflation, which excludes food and energy. Now on a surface level, this is good news because it's down from the September number at 3%. But again, we caution in terms of the fact that that might have been some imputed 0 numbers. For October, so we'll have to continue to look at these numbers as we get the actual December numbers in January. Now we move to part 2 of the economic update were the releases we want to share with you from this prior week. We've got four of them for you and then we've got 1 update on the overall geopolitical situation. First up, the weekly initial unemployment claims remain very healthy at a 208,000 level for the week ending January 3rd, so this has remained very low for about now 12 to 24 months in a range that has gone up and down a little bit, but has basically remained stable and not increased to provide a worry. And second, the job openings report showed that for the November month, job openings were down a little bit from 7.4 million in October to 7.1 million in November. And 3rd we have the new non-farm payroll report that came out just this morning at 8:30 which shows a couple of different items we're going to give you 3 months of data because of some of the delay again in the government shutdown. So we go all the way back to October where there was a minus or a decline of 173,000 jobs on the new non-farm payroll. Report. Now we give you some additional information on that data point where about 150 or so thousand of that was related to government workers and the planned or resignations for the dose campaign in the federal government. So that certainly offsets some of the gains in the private sector, again to be a net -173,000 jobs. In November that rebounded to a +56,000 jobs. And now just this morning for December, the report showed 50,000 new non-farm payrolls that were created. So clearly, at least in this three-month span, a little bit more slowing in the numbers than we have seen in the past 12 months. And 4th also as an offset to some of the slowing job numbers, there was a significant increase in productivity of labor workers. So ultimately, the third quarter 2025 report showed that productivity in labor increased 4.9% in the third quarter, which was a significant jump. And a pretty high number overall. So productivity seems to be going very well. And finally, outside of economic data, we've got some geopolitical updates as we started the week with the news with the Venezuela situation and the capture of Nicolas Maduro and the offset from that. So we'll get George's take on that in particular as well as economic data plus our conversations with Steve and Rajeev. So George, first to you, you're first up on the opportunity to share with our audience. Your take on the Venezuela situation and the overall economic data we just heard, George.

George Mateyo [00:07:04]
Well, to say that we were surprised, I guess, about the news that transpired over the last week or so in Venezuela. Brian would probably be an understatement. I think many people, us included, or at least myself included. It's not too surprising to see some action being taken place, but the force with which the action was levied was really quite stunning and maybe a little bit surprising as I said. But to kind of put things in the context, I think it's important to remember a few things, one of which is the. Fact that oil is a big part of the Venezuelan economy represents something like 70% of their entire exports. So you know 3/4 roughly of their exports is tied to oil, which is a pretty big deal. And I think oil is at the center of this, this ongoing discussion. To widen the lens a bit further, though, Venezuelan oil only represents about 1% of the entire global output, so they're not really at the current level. Anyway, not really. A big driver of overall energy prices, but they do have a ton of oil in reserve and essentially that is I think they're the largest country in the country that has the largest amount of oil reserves. In the world, which is pretty astonishing. So I think the oil debate is probably the the issue here. We'll have to kind of think about that. What that looks like over time. It's not going to mean probably something in the near term in the sense that much of the oil reserves probably are actually hard to reach in the sense that there's a lot of excess capacity and a lot of under investment that's kind of come along with the infrastructure inside Venezuelan economy. That you get that oil moving, so to some extent, I think this is just the longer-term situation. But in the near term, I think this is more of a political event than any economic events. And that's one thing that we've probably seen the markets this week in the sense that there hasn't been too much movement in the overall energy complex. We haven't seen, you know, jumps in, in, in, in inflation indicators and so forth. And the overall stock market is certainly taking its stride with a pretty good start to the year. So again, I think this is the longer term. Maybe economic event, but in the short term this is more of a political event than anything else. Steve, I know you've paid close attention to the energy markets. I'm sure that you thought so. How did you kind of process what we saw in the last week or so?

Steve Hoedt [00:09:04]
Yeah, I would say, George, maybe the time caught everyone a little bit off guard, but I have to say it feels to me that the wheels were put in motion for this when Venezuela threatened its neighbor Guyana year or so ago when they made claims and what they call the Essequibo region. But what the Guineese. Are, it's part part of Guyana and the offshore area and? You know, you look at that, that's the most important new discovery in the world in terms of oil field put into production in the last 30 years, it's run by ExxonMobil. And when Venezuela basically threatened to to, to go in and take that by force. In my view, the clock. Just taking on how long the US would tolerate bad actor behavior from from Maduro, so you know that that kind of put things in motion. Then he did his little dance and then triggered, triggered, triggered Trump, apparently. But you know, on a serious note, when you look at the oil market dynamics, look, this is not going to impact things for a long time. And there are a couple reasons for that. Number one, the under investment in the infrastructure. There is one thing, but #2 the oil there is not high quality, it's dirty heavy crude. It's not the type of crude that you would go for unless you really need to go in that direction. It's very similar to the oil sands crude out of Alberta with the caveat that it's a little bit cheaper to produce than Albertan oil sands oil because it's hotter in Venezuela than it is in Canada. But at the end of the day, there are better fields and better resources to develop globally. So, you know when the administration talks about the oil companies are going to be willing to invest billions and billions and billions. Do this to to bring this thing back online. I really question that because you wouldn't invest there until you have. Other projects that rise, or you have to pass an internal rate of return hurdle to to make the investment useful. And I don't know that in the current global oil market that those are assets that that that the oil companies would really be interested in developing quite honestly.

George Mateyo [00:11:48]
Well, that's great Steve. I appreciate all that context and I think meanwhile, we've started to see some normalization with respect to economic data, of course. So the other thing that really kind of defined, I think the quarter that just ended was the government shutdown that we talked a lot about on this podcast and other places too and to some extent I think that really cloudy the the. Economic picture. And now we're starting to kind of see that fog lift a little bit and what we've seen kind of thus far anyway is probably more the same in the sense that the overall inflation story is moderating. I wouldn't say it's cooling to the point of that, the that target, but it's getting closer and it's kind of moving that direction. We'll see if that plays out. I think there's kind of some question marks around that. We've also seen the consumer, I would say, retrenched, but they're kind of moderating their behavior too. It seemed like Christmas was OK. I'd say based on some indicators. But overall, spending is still pretty healthy. Definitely the corporate sector, and particularly as relates to AI, which we can maybe talk about it at a different time. That's a whole nother subject. But regime, I think the big the big question saying from the Fed is how the consumer processing their job prospects and specifically we got numbers this morning that suggest the labor markets still in okay shape right now but it's certainly softening quite materially. The unemployment rate actually moved lower, which maybe because kind of further credence. The Fed's not doing anything when they get together this month, but again, we still have to be mindful that the overall market is slowing. Quite notably, we've seen that in other reports as well, but you kind of put all this in your crystal ball. How do you think that is processing the implement the fluent situation and what they're thinking about respected interest rates as we move into the new year?

Rajeev Sharma [00:13:21]
Well that’s a good question, George. I mean the unemployment rate falling for December and that two more than expected. We saw Treasury yields immediately react moving higher in yields specifically as non-farm payrolls rose 50,000 and less than economics economists had forecast, and traders all but gave up on the fact that we're going to get a rate cut this month. Those odds are already pretty low, and after this labor report came out, nobody's really expecting anything at the January 28th FMC meeting. For a fed rate cut now, so now the market has gravitated towards two rate cuts for 2026, with the first one coming sometime around mid year most likely June. And job data was the first clean read that we got on the labor picture after. As you mentioned, the government shutdown, which was six weeks. So now we finally have a fresh jobs report. We could start seeing changes in those two rate cut expectations by the market. What that would depend on would be on how labor market continues to perform over the next several months. Then you also have inflation. That is cooling, but still above the feds 2% target goal. So again, just like in the past, just like we saw before, data is going to be the key of how the Fed is going to move forward with their rate cutting cycle. It will likely be, in my opinion a stop-start approach for rate cuts. The other factor that's affecting this is the fact that many people, many investors, feel that we're pretty close to the neutral rate. So even if we do get rate cuts, we're probably closer to well by the end of this year, we'll be closer to the end of a rate cutting cycle than the beginning of 1. So where do we go after that? I think that's also in the minds of a lot of investors. The other factor, the other factor that's really affecting the treasury markets right now is that investors are reducing their long positions and they're going short in treasuries. And again, this is a result of these renewed geopolitical uncertainties. Now generally in the past, whenever you've had some kind of geopolitical uncertainty, treasures have been viewed as safety haven asset and you saw money pouring into treasuries. We didn't see that on the Venezuelan news this time around. It wasn't that much of a factor as far as why treasuries yields were going lower in the first couple of days of the trading year, but we don't see those foreign buyers. We want to see the latest foreign buyers reports last couple of reports, they were still pretty firm on their levels of buying treasuries. It's going to be very important to see if they continue to be that way. Specifically, European buyers, they started slowing down their purchases of treasuries and some import to see if that continues as well. And then you have other factors in in fixed income that are affecting headlines and and the most recent one being Fannie and Freddie being told to buy $200 billion in mortgage bonds. This move is a targeted move that is an attempt to really push mortgage rates lower by boosting demand for mortgage-backed securities and many view this as an aggressive intervention. And the question is how far the GSE's should be able to go to impact housing finance. So again, we haven't seen the scale of intervention since 2008 =, And it's a directive that's coming directly from President Trump. So, this may again start to bring in the question of the independence or how we look at monetary policy going forward. I look at how we're how things are being affected or impacted by directives from from the White House. Again, this may deliver some short term relief. But again, it asks the question where is that line between monetary and housing policy?

George Mateyo [00:16:40]
Rajeev, you're right to point that out. And I think what it signals to me is just as you mentioned a broader sentiment that the Oval Office is trying to really dictate policy in a pretty overt way. And of course, you know, every administration has their own view on how they want to build their sticks, so to speak or kind of pull the lever of the economy. But as we talked about and we mentioned this and I think our year end outlook call your head outlook call I should say is the fact that affordability has become a real lightning rod issue and that's just maybe a covert for inflation or some other things. Well, I think Brian, maybe experienced some of that during his travels recently when people asking him about inflation too and prices. And again, this notion that the White House is trying to engineer mortgage rates or maybe manipulate the housing market to some extent says to me that again, they're really concerned about inflation and affordability as a domestic issue. So I think that we just have to kind of keep that in mind. I think it does maybe lend some support to this notion that inflation will probably be somewhat stickier. Irrespective of what happens at some of these indicators that then watches like the inflation, the inflation rate itself. So I don't know, Steve, if you've got a view on that, I think. But from our perspective, I think it makes sense to remind people that positioning in this purple position, this, this environment probably needs to be again be both based on diversification #1, but also what you've done with your portfolio, Steve is kind of tilt a little bit more towards cyclicality and I think that's also proven to be somewhat beneficial in this of this year. Any thoughts on how that actually enters to your calculus around portfolio positioning as we think about 2026.

Steve Hoedt [00:18:12]
Yeah, George, you know, when you look at the way. That the year has started out, I mean solid beginning of the year, right up really nicely through the 1st 5 days. And when you look at the things that have been working versus the things that have been not working, we we've seen the Mag 7 you know not out of the gate in Ripple or in fashion not getting crushed or anything but the cyclicals have been doing very well and it seems that the market is coming around to our point of view which is that the quote unquote run it hot scenario seems to be in play for the for the foreseeable future and you know, this is what we kind of talked about in our outlook the caveat and the reason why we continue to talk about diversification and owning other assets instead of just saying you know, push all your chips to the center of the table for the on on equities is that you know the run at hot scenario has inflationary implications and when you get to the middle of the year with the new Fed chair. I don't know that you're going to get the market reacting to what happens with a run at hot scenario in a bullish fashion, so. You know all things right now point to earnings having a good year because of all these kind of growth positive initiatives that we're talking about, but it does introduce some additional uncertainty, a little bit further down the road and that that's the thing that kind of gives us pause and we're very happy to see the market doing well out of the gate. But I think you just got to take it with a little bit of a grain of salt.

Brian Pietrangelo [00:20:05]
Well, Steve, you mentioned the new Fed chair, Rajeev, what are your thoughts on the updated stats of probabilities or possibilities in a new Fed chair?

Rajeev Sharma [00:20:13]
Stats are saying it's probably be somebody named Kevin, but yeah, we do have the 2 front runners, Kevin Hassett & Kevin Washington. I think that what's going to be very important is, you know, the perception really is again, back to what will be central bank independence and what will it look like? What would the Fed look like after Fed Chair Powell leaves? I think what's going to be very important. There are other rotations within the Fed. Obviously the chair doesn't have the final say. It has to be a vote. So those are the voting Members that will be there as well. But I think what's really important right now is that the market understands that whoever is going to be in that position as Fed Chair, it's going to be handpicked by President Trump, and we all know that President Trump wants more rate cuts, wants to really start moving monetary policy to more of a cutting cycle. So many feel that it will be a more aggressive Fed going forward. So I do think right now Hassett’s got the lead right now as far as the polls go.

Brian Pietrangelo [00:21:09]
Thanks, Rajeev. And we'll finish up today's podcast as the first of the New Year with George as his overall arching comments for our listeners. George, any thoughts?

George Mateyo [00:21:19]
Well, to some extent, we’ve kind of covered these already, Brian, but I think just in terms of how we're thinking about your head, I think it is important again to reiterate, despite all of the consternation and maybe concern things we think, number one, that the business expansion is going to continue, meaning the odds for a recession is pretty low right now and that's going to be good for overall top line revenue growth that's going to actually be good for earnings as well earnings furthermore probably have some support from productivity gains, which is good for margins and that all leads to probably, as Steve mentioned, a pretty good recipe for stock prices. The converse of that I guess, is the fact that the valuations coming this year as they were last year this time frankly are still quite extended. So we're not going to likely see a whole lot of support this year from valuations. And I think over the past 12 months with the market up some 15-16%. Most of that too is based on stronger earnings as opposed to valuation. So in other words. If we start to see some deterioration in the urns or productivity story, that could be somewhat problematic for stock prices and maybe Steve pointing out, inflation might be one of those things that causes that to shift a little bit, but nonetheless again as I said #1, we still think the overall odds of a recession is pretty low. #2 the other thing we want to emphasize is that I think the overall narrative around investing in AI is shifting, it's not falling apart, but I think it's becoming more discerning. As Steve you pointed out, it was one kind of these moments where we seem kind of a rightly tide with many boats and now I think there's probably more discernment between the winners and the losers and that just again creates more opportunities but also creates some level of risk. And frankly there are more opportunities in other parts of the market that we're seeing attractive valuations. And then thirdly, the thing that I think we again, we talked about this too is that diversification probably didn't matter much from 2021 to 2024 in this to some extent really we saw really the market being levitated and supported by just the handful of stocks. And actually last year was a year where diversification really worked. If you have exposure towards international markets. If you have exposure to bonds, if you have exposure to real assets, your portfolio would have been better off than just owning that handful of stocks. And I think that's still somewhat underappreciated, Brian. So I think in our view, again being diversified is probably a really preferred winning strategy for the long run. And I know that sounds a little bit kind of like a cliche, but I think it's very true. And that's one thing that we're going to continue. To emphasize, as we think about the year ahead.

Brian Pietrangelo [00:23:44]
Well, thanks for the conversation today, George, Steve and Rajeev. We appreciate your insights and thanks to our listeners for joining us today. Be sure to subscribe to the key Wealth Matters podcast through your favorite podcast app. As always, past performance is no guarantee of future results, and we know your financial situation is personal to you, so reach out to your relationship manager, portfolio strategist or financial advisor For more information and we'll catch up with you next week to see how the world and the markets have changed and provide those keys to help you navigate your financial journey.

Disclosures [00:24:19]
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