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, April 17th, 2026. I'm Brian Pietrangelo, and welcome to the podcast. On occasion, we do talk about human ingenuity on the podcast, and this is certainly an example this past week where we've got the Artemis space exploration opportunity. What a great opportunity to see that there and the success of the mission. In addition, this past week, I also had the opportunity to visit a number of our markets across the East Coast, including Buffalo, Syracuse, and Philadelphia, and had a great engagement opportunity in each of the client events to meet with clients and talk about the markets and the economy. And also in particular on the sports front, tying it back to the beginning of the playoff series for both the NHL and the NBA for hockey and basketball, Want to wish the Cavs here in our own hometown, Cleveland, some good luck in the playoffs as well. And also in Buffalo market, the Sabres made the playoffs for the first time in a long time, almost 14 years. And being in Buffalo was a great opportunity to talk about the Sabres. And in general, good luck to all our markets and all our teams in those markets. Success in the playoffs. 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. 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 the market and economic news for the week, we've got 5 quick hitter updates for economic releases and then we'll talk to Steve about what's happening in the markets. First up, we've got the Monday report that came out for existing home sales, which dropped by 3.6% in the month of March, and that is a level of 3.98 million units, which was the lowest since June of 2025, according to the National Association of Realtors. This also has complications relative to mortgage rates, which were down below 6% for a little bit, but are now back up to 6.37% for a 30-year mortgage, which continues to stymie a little bit of the demand and supply balance. Second, on Tuesday, we got the report for the Producer Price Index measure of inflation, otherwise known as PPI, for the month of March, which was up 0.5%. Now that was slightly better than expectations given estimates had skyrocketed given the Iran conflict, but ultimately it came in at a decent level and was somewhat positive for the markets. That equates to a 4.0% year-over-year rate and 3.6% if it's core excluding food and energy. And third, we had the report from the Federal Reserve known as their Beige Book report, which comes out two weeks in advance of the upcoming Federal Open Market Committee meeting on April 29th. Overall economic activity increased at a slight to modest pace in eight of the 12 Federal Reserve districts, with the other four being at least little no change and or modest declines. To be expected and not much of a surprise, the Middle East conflict was a major source of uncertainty that continued to complicate decision-making. Many of the districts continued to report signs of consumer financial strain with increased price sensitivity, and we also had on balance the employment markets in most of the districts were steady or up slightly in the reporting period. And 4th up on Thursday, the initial unemployment claims report came out and again remained very stable at 207,000 for the week ending April 11th. And to round out the week, on Thursday also, #5 was industrial production for the month of March, which was down by 0.5%. Now this is the first time in three months that it's actually been negative if you go back all the way to December. So there's been a pretty good run in industrial production as a manufacturing side of an indicator, and we'll have to see if the 0.5% decline in March is just one month or a broader trend. So outside of those economic updates, a couple other reminders to give you in terms of some news items. The first is the confirmation hearing for Kevin Warsh as the appointee for the new Fed chair has been basically penciled in for next week on April 21st. Again, this is important because the confirmation process does include a two-step process after President Trump did nominate Kevin Warsh some time ago. You have to go through the Senate Banking Committee and then you have to go through the full Senate for confirmation into the Fed Chair position. There are complications with this confirmation process given that Senator Thom Tillis out of North Carolina has made comments publicly that he will tend to block the vote for Kevin Warsh if the Trump administration and or the federal investigation on Jay Powell is not dropped for the inquisition into the spending on the new Federal Reserve building. And a reminder from a timing perspective, Jay Powell's chair ends on May 15th, which is less than 30 days away. And so that complicates the hearing and the process and where there will be a process of replacing Jay Powell on the Fed Chair seat. So we'll have to wait and see how this goes forward. We also got some updated information about the tariff refund process. It still seems to be a little bit complicated, but there is a process in which there can be filings for refunds. So we'll give you more information on that as it unfolds. So with that, let's turn to Steve. Steve, we're going to start with you on a two-part session. The first part is to give your thoughts on what's happening in Iran and what's going on with oil and jet fuel prices and jet fuel volumes, everything on Iran. And then the second part is we'll get your update on what's happening in the markets. Pretty good rally this week, so we'll get your take on both. So Steve, let's hear your thoughts, starting with Iran.

Steve Hoedt [00:06:32]

Well, Brian, there's been more news out this morning. And Iran is saying that the Strait of Hormuz is now completely open to commercial traffic in response to the ceasefire that has been extended to southern Lebanon. I think that when you look at this from a broader picture, it's a good faith bargaining move on their part, given that they had said that if there were a suspension of hostilities across all the quote unquote fronts in the Middle East that they would that they would reopen the strait. And and they have now done that. There's obviously a lot to try to sort out here with this. Looks like we're going to have more talks between the US and Iran over the weekend and Pakistan. So At the same time, you've got the administration saying that the U.S. naval blockade of Iranian ports remains in place. So clearly, we don't have a solution to this yet. But incrementally, we're seeing positive steps taken by the parties on both sides to come to some kind of arrangement here. Clearly, the Iranians are showing that they remain firmly in control of the Strait of Hormuz. You know, we'll see how things go. I think, though, that the message here is that incrementally we've seen positives and, you know, we'll talk more about the markets here in a little bit, but the markets have for in large part moved on from the crisis at this point in time. They seem to be focusing on other things.

Brian Pietrangelo [00:08:17]

Steve, a couple of interesting articles help our listeners understand what volume and storage means for oil and then the whole concept that Europe is in a jet fuel crisis because of how the supply chain works.

Steve Hoedt [00:08:28]

Yeah, you know, when you focus on the situation in Europe, so the Europeans don't really make, obviously don't produce a lot of oil and they don't have all the refining capacity necessary to meet the needs for all the various refined products that they have. So they rely very heavily on imported jet fuel from other places that have refinery capacity. And those refineries are typically using oil that comes from the Middle East. And so there's been a massive disruption to this. And, you know, this is what you see when you see a knock-on impact down the chain when a refinery can't get the typical oil feedstock that it has in order to be able to produce the refined products necessary, whether it's gas, diesel fuel, jet fuel, what have you, that creates disruption. So, you know, there's a buffer in the system. It doesn't run out immediately, right? But over a period of time, if you don't continuously have that flow coming in to restock what's being used, you end up with shortages and stockouts. And that's what we potentially see in the case of jet fuel in Europe, maybe another month and a half from now. So if you're planning to travel to Europe in June or July, you might have some travel disruptions, let's put it that way. And I think that you've got same situation starting to emerge across Asia too, where we've seen supply disruptions for refined products largely out of India.

Brian Pietrangelo [00:10:07]

So you made the comment earlier, Steve, that the market has somewhat looked past this, but based on your comments relative to the oil supply, it could linger on for a longer point than we might imagine. So interesting thoughts there. So Steve, let's pivot back to the market. Market had a pretty good week so far this week, a little bit of a tech rally, and we've also got continued earnings releases for the first quarter of 2026. What are your thoughts?

Steve Hoedt [00:10:31]

Yeah, so it was an important week this week. I would tell you, I still don't think we have broad momentum in the market right now. And if you look across the board, we've not seen anything that, you know, we've talked before about the concept of thrust, which means you have a broad based participatory move to move higher. We did not see that this week. But what is abundantly clear is that the market made a new 20-day high and a new 65-day high. So that's a new high for one month and three months. And that does firmly put the trend back in the positive camp for now. We would love to see broader participation and more breadth on this, but you can't fight the trend when the trend decides to move higher here. So just because we don't have all the boxes checked doesn't mean that the market hasn't done some healing and repair here because it very clearly has. So we sit here at 71, roughly 7,100 or a little bit more than that this morning. So cleared the 7,000 mark, which we'd been having some trouble with back in February where we tried to punch through that a couple of different times. So the market definitely has enough oomph behind it here to do that. You know, largely to your point about tech, Brian, it's been the tech stocks that have kind of pushed the market up this week. So we had a couple of earnings releases that were okay out of foreign companies that are that are tied to this AI semiconductor theme in TSMC and which is Taiwan Semiconductor and ASML, which is the the large semiconductor capital equipment company out of the Netherlands. And they both had good things to say about what's going on in the AI supply chain. And we've seen stocks that have been, for lack of a better way to phrase it, stuck in the mud for the last few months, like Nvidia and others move to new multi-month highs. So maybe not at new all time highs yet for those names, unlike the market, but When you have stocks that are 8% weights in the S&P 500 go up 25% in a 10-day period, it moves price. And that's what we've seen. You had Nvidia back at the beginning of the month of April trading with $165, and now it's at $200. So that's a significant move. for a large weight in the S&P 500. And there have been others. You know, I'm not just signaling out Nvidia because it's it's special. I'm singling it out as an example. We've also seen software catch a bit of a bounce here in the last few sessions, which has helped help this market out as well, too. So, you know, corporate earnings are starting to filter in. We've had a pretty good set of earnings reports out of the large banks this week. We've seen the S&P 500 earnings line move to yet another all-time high. It's at 340 bucks this week. I keep telling people, and you've heard us on these calls time and time and time again, say that the market's going to do whatever the market's going to do. But if you focus on the trend direction of that long-term earn on that forward 12-month earnings line, on a long-term basis, as long as that line is heading up and to the right, it's very difficult for very bad things to happen to the market. And that's exactly what we've seen over the last couple of months. Earnings continue to move relentlessly higher on a forward 12-month basis while the market was going through this kerfuffle about the Strait of Hormuz crisis. And look, I don't dispute that there's a lot of bad things that have happened to people as a result of what happened over there. And I don't mean to minimize that, but look, at the end of the day, earnings moved higher. And what if stock's done? They've moved, they've followed the earnings line to a new all-time high. So that I think is exactly what we would expect here. We've seen valuations come up as the market has moved higher, which is what you'd expect. Valuation troughed at about 19 times forward earnings back late last month. We're up to 20 and a half, so we've added one and a half turns, which is again what you'd expect. It shows that there's positive sentiment coming back into the market. PE is really a sentiment indicator for the market more than anything else. And I think that you've seen that. But if you think about it, 20 and a half is a lot lower than 23, which is where we were at last October, November. So I would argue that the market looks fairly reasonable here. And if this earnings line continues to do what it's doing, which is chugging up into the right, I think that there's a pretty good likelihood that this rally could continue from here.

Brian Pietrangelo [00:15:49]

thanks a lot for those comments, Steve. I think it's very informative for our listeners to understand what's going on. So thanks for your perspectives. Now let's turn over to the fixed income side of the equation and get some comments from Rajeev. Let's start with your thoughts, Rajeev, on what's happening with overall yields and in the fixed income market.

Rajeev Sharma [00:16:06]

So yields have kind of moved around along the curve. Some observations I have here is that the very front end of the curve, so I'm talking about the one- to three-month TiBO maturities, they declined from April 1 to April 8 by about 5 to 7 basis points. Longer-dated maturities, the 10-year, the 20-year, the 30-year, they showed a general downward trend this month after spiking in March. We all know that March yields were considerably higher than where they are today as the war broke out. The 10-year treasury note yield was at 4.33% as we started April, and today, we're about 4.31%. But just yesterday, yields in the 10-year had gone down to 4.28%, and we're giving some of that back today. The two-year treasury note yield, as we stand today, is around 3.78%. But last month, we had seen yields in the two-year touch 4%. Much of that had to do with the market starting to think about rate hikes rather than cuts. The two-year is the most sensitive to monetary policy, and any talks about a rate hike or a cut will be reflected in that two-year. So if we look at the shape of the curve, the 2s, 10s curve is the best way to look at how the curve is stacking up. We're stubbornly stuck around 50 basis points with being a differential between the two-year and the 10-year yields. This differential was around 70 basis points at the end of last year. The flattening of the yield curve is the pain trade in the market. Many investors have a steepening bias. on their portfolios. They're expected, as we started the year off, many investors, and even last year, thought that, okay, we're on a rate cutting cycle, so the front end should move lower, the back end will be pretty anchored, and you'll have a steeper yield curve. That has not really happened, and it's been a pain trade. The escalation of the Iran conflict had a lot to do with that. Disruptions to oil flow has caused oil prices to move higher, which in turn has led to these fears about stagflation and higher for longer inflation risk to the economy. If inflation is higher, the Fed can't cut rates, and that has prompted a repricing in the front end of the curve, and it's led to that flattening. Now, if you see oil prices come down, it is immediately reflected by a steepening of the yield curve. We saw that on April 8th, where the yield curve bull steepened as oil dropped from $100 a barrel. That day, the 2-year dropped 7 basis points in one day. The 10-year dropped 4 basis points immediately. Today, however, we see the curve steepening A little more today on today's markets, if I look at my screens, as some Gulf Arab and European leaders are saying that this might take six months to reach a peace deal that everybody agrees upon, that has sparked a bond sell-off today, and longer-dated treasuries are underperforming on concerns that oil will be higher for longer, which means inflation will be higher for longer. Futures markets right now are putting a high probability that the Fed does absolutely nothing this year, and rates remain steady till the end of the year. This was also supported by the latest Fed minutes from the last FOMC meeting, where the overall tone was to keep rates on hold due to an elevated inflation and employment risks. But if you remember just a few months ago, many expectations were that-- and even our outlook was that we would have rate cuts in the second-half of the year. Now, those expectations are further down the road in the second-half of the year. So June expectations and July expectations have somewhat been dashed now. I think everybody's looking at September for maybe a possibility of a rate cut. This is all going to change depending on how this war continues, when we find some resolution of this war, when the Fed can get back to looking at numbers, and what actually is the impact of war on those inflation data points that we're going to see as we get each and every single data released for inflation and employment.

Brian Pietrangelo [00:19:47]

Thanks for that update on yields, Rajeev. Now, let's talk about some things we were talking about in the office the other day with some interesting data regarding FedSpeak.

Rajeev Sharma [00:19:55]

Now, one thing that I think is very interesting is Bloomberg Economics, they've developed what they call a daily FedSpeak Index. This index is developed using an algorithm that uses news headlines to cover the speaking engagements of every Fed member, and then translate that to whether they sound dovish or hawkish. They've captured over 6,000 speaking engagements since 2009, that's when they created this index. They've created this since 2009. And we've seen here that the narrative from the Fed members has been moving firmly in the hawkish area. It has a lot to do with most Fed members not in any rush to vote to cut rates. In fact, in the last Fed meeting, only one member wanted to vote for a rate cut, or actually voted for a rate cut. So rate cut expectations have at least been pushed back later part of the year, as I mentioned, second-half of the year, some Fed members in their narrative are saying that no rate cuts till 2027.

Brian Pietrangelo [00:20:51]

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

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