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 25th, 2025. I'm Brian Pietrangelo and welcome to the podcast. If you looked for the podcast last week, you’d find that we were not in service. We took the day off in observance of Good Friday. In addition to that, the stock market was closed. So we are glad that you rejoined us this week and have an opportunity to listen to us. Thanks so much for joining.
And this week, if you're a sports fan, you've got a ton of great viewing opportunities. It's one of the rare opportunities where there are four major events going on in the Major League sports franchises. You've got the NBA Playoffs occurring. You’ve got the NHL Playoffs occurring. Major League Baseball is under full swing, and the NFL draft started its first round beginning just last night. So a lot of fun, again, if you’re a sports fans.
With that, I would like to introduce our panel of investing experts. Some might say they're top draft picks in their own right. 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 news, the economic calendar was pretty light although we've got three quick updates for you. Beginning first with the weekly initial unemployment claims for the week ending April 19th came in at 222,000 which was very stable and continues to remain stable as a good indicator for the overall stability of the employment front relative to company layoffs. The other side of that equation is continuing unemployment claims, and that number remains stable as well. So we'll have to see, in spite of a lot of the volatility in the market, the news for this indicator continues to remain favorable.
And second, sales of existing homes, as reported by the National Association of Realtors, fell for the month of March down 5.9%. Now this was the biggest month over month decline since November 2022 and has to do with the overall inventory on the market relative to mortgage rates and relative to demand and supply, so we thought there would be some loosening up there, and it looks like there was a little bit, but ultimately this has to with a dynamic in the inventory for the overall existing home sales. So we'll continue to watch that number.
And third, the Federal Reserve's Beige Book report came out on Wednesday, and as usual that typically comes out two weeks in advance of the next upcoming Federal Reserve meeting, which is on May 7th. The Beige Book recorded in the National Summary showed that economic activity was changed very little since the previous report, but uncertainty around international trade policy was pervasive across the 12 districts. In terms of activity, just five out of the 12 districts saw slight growth. Three districts noted activity was relatively unchanged and the remaining four districts reported slight to modest declines.
In addition, overall hiring from an employment front was slower in terms of consumer-facing firms more so than business-related firms. So again, is this anticipation of consumer spending slowing relative to tariffs and other phenomenon? We'll have to find out.
Also, as we talk to our panel today, we will have a conversation around news on tariffs, Fed independence, and what's going on with first quarter 2025 earnings. So George, let's turn to you first. Get an update on your thoughts on tariffs and what’s going on in the general economy.

George Mateyo [00:04:09] Well, Brian, I think it's maybe fair to say – I'm not sure if I really want to call victory just yet, and we can talk to Steve a little later about kind of where we are from the technical perspective of the market – but it feels to me like we may have seen the peak of uncertainty. And I have to really emphasize that May – and of course we should probably time stamp this to say this is 10 a.m. on Friday the 25th of April, knowing things could change pretty quickly, and I don't want to get too Pollyannaish about it – but it kind of feels like to me that we definitely have de-escalated a good bit this week.
Now, we're definitely still in the midst of a trade war and we haven't seen Armistice Day or peace break out in a big way yet, so there's still a lot of things to navigate here, but it does feel to me like some of the extreme uncertainty that we just saw a few weeks ago has come down a bit. And that's certainly reflected in risk assets, of course, as we've seen a nice rally in the past few days or so.
But this week, of course, we got the news from both sides, from both China and the U.S. in terms of rhetoric from both leaders suggesting that they maybe feel like some of the discussions to date have been counterproductive or maybe a little bit damaging to the economies, both economies rather.
And I think the big headline this week of course revolved around Treasury Secretary Scott Bessent, who kind of came out with the white flag a little bit to suggest that maybe things are really starting to slow down a little bit and there's maybe a path forward that we can see some of these tariffs come down.
I guess if I had to kind of back of the envelope kind of do some math, it suggests to me that, you know, the tariff rate that we often kind of focus on here, where again just a year ago for perspective was around two to three percent and we've kind of gotten news from Liberation Day and some of these reciprocal tariffs that rate was kind of quickly marked up to something in the mid to low 20s or so. So we've kind of seen a significant spike in the tariff rate if all those reciprocal tariffs go through.
My guess is, kind of where we are right now, some of these talks are to be believed. And we don't see a lot of action just yet. A lot of the talk, though, if we believe the talk that's been kind of put forth thus far, we've seen, of course, maybe that rate come down to something kind of in the mid-teens or so, to kind of put that perspective. So again, tariffs are still elevated, but we've seeing those come down a little bit.
And I think it is fair to say that there's still some damage to the economy, given the level of uncertainty we've seen that kind of take place with respect to companies coming out and talking about earnings this week. Putting forth some really wide range of forecasts, knowing that their range of outcomes is exceedingly wide still, so we still have to navigate that as well. And then from the risk-asset perspective, we've also seen market multiples come back up a little bit, which again suggests the market isn't really historically cheap, but again, no one really knows exactly where earnings are going to go, which makes that number hard to calculate for sure. The economy, overall, seems to be doing okay.
Of course, we kind of pay attention to some of the near-term, more high-frequency data points, like jobless claims and so forth. Those numbers are actually still pretty muted, so we haven't seen a big spike in the job numbers in a really negative way. I think next week will be very key to think about the jobs report for the month of April. That'll be released a week from this Friday, a week from today, really, and I think that'll be kind of curious to see if that actually has any impact on the-if the tariff impact and if the uncertainty impact has any discernible impact on the jobs market.
The other story, I think, this week that really kind of deserves mention, though, of course, is what we kind of saw earlier in the week and late last week, when the president was talking a little about his angst, perhaps, with the Federal Reserve and his insistence almost that the Federal Reserve cut interest rates. There was a lot of chatter over the weekend, and then they kind of split over to Monday of this week, where there frankly was a lot of concern about whether or not the Fed would maintain its independence, whether or not Jay Powell would keep his job, and really what that meant for the economy overall.
I think our colleague, Cynthia Honcharenko, has a really great piece out that talked about this. She identified a couple of scenarios that could ensue. But again, the bigger picture is really what happens to the Fed going forward and whether or not they can maintain their independence, which they've actually been able to preserve for over a hundred years now.
But Rajeev, if you kind of think about that notion of Fed independence, how do you think about it in the context of the bond market? How should we think about that in the context of the broader economy?

Rajeev Sharma [00:08:09] Well, you know, George, it's a great question and it did move the markets. I mean, you have questions about whether the Fed can remain independent and you're going to cause a lot of market volatility, especially in the bond market, which really looks at the Fed to really have their mandates that keep their monetary policy independent of any political pressure. We've seen this before, too. We saw this in Trump's first term also that he had come out pretty much swinging and saying that Fed Chair Powell is not cutting rates fast enough, he needs to do more for the economy. We're seeing it again this time. But this time I think the background and the backdrop is much more complex than we had in Trump 1.0.
We find ourselves today with bond markets having to deal with increased uncertainty, and when that happens, you see the long end start to behave more volatile. We've seen the yield curve steepen, and a lot of the steepening had to do with these talks about Fed independence. I think we did get some voice of reason by Treasury Secretary Scott Bessent, who had an interview this week after some of the noise that came out, kind of soothed investors' concerns, and he spoke about the importance of Fed independence. He spoke about the bond market. He spoke about treasuries. He added some calm to the bond markets midweek, and I think that was very important. And it really kind of slowed down some of the talk that Trump had been saying about Fed Chair Powell not moving fast enough, or maybe it's time for him to go. Kind of just muted that a little bit, and I think that's exactly what the market needed. We needed that voice of reason and we got it.
And what ended up happening is what you alluded to, George, that we returned to the risk on trade midweek and we found some other members of the Fed also come out and they were a bit more dovish. We had Fed governor Chris Waller come out. Cleveland Fed president Beth Hammack came out. They both said the Fed could move with rate cuts sooner than expected, and by doing so Treasury yields moved lower and these gains are maintained after a pretty decent seven year Treasury auction as well.
So most of the support for Treasuries this week was occurring in the front end, and investors still don't find a real need to start adding duration to their portfolios. They're comfortable on the front-end, they're getting pretty decent yields on the front end and that's really helped the bond market kind of stabilize from some of the big volatile moves that we saw just two weeks ago.
Now, Treasuries got back to doing what they're supposed to be doing in considering them to be a safety haven asset. They did move lower on the week, but you're absolutely right: the beginning of the week was not a smooth ride, and I think the brunt of that pain was felt in the long end of the yield curve. If you looked at the beginning of the week, the difference between a five-year Treasury note yield and a 30-year Treasury note yield hit the steepest levels that we've seen since 2021. And the only similarity between both 2021 and today is that prospect of stagflation. And when that debate on stagflation starts to continue, it puts a lot of pressure on bond yields.
And then that debate became even more complicated because the market is expecting four rate cuts for 2025. And that's double what the Fed is saying. And I think, you know, you're gonna have to resolve that at some point. We do have some Fed members coming out and say that the Fed could move earlier than expected, maybe something in June. We do have a Fed meeting coming up in May. So it'll be interesting to see what cues we can get. No one's expecting a rate cut in May, but it'd be interesting to see if they give us some sort of indication of where the Fed members' heads are at and what we may be able to expect for the June meeting.
But I think right now, you have to really understand that the moves that we've been seeing in the market, they did calm down at the end of the week, but we did see a lot of volatility this week. So amongst all this volatility and the risk on trade, we did see investment grade credit spreads narrow in the week, so we got some support there. There was that risk on trade, so we've seen investment grade spreads tighter by eight basis points this week. But you can really see the pronounced moves in high yield spreads. They tightened by 44 basis points this week, again showing some stability in the bond market.

George Mateyo [00:12:08] So in terms of volatility, Steve, we've seen a significant amount of volatility ripple through the equity markets too. And I had to actually check this morning and I wasn't really quite sure. I was actually kind of close to my estimate, I guess. But I was kind of surprised to see the market, the quote unquote, the market is only down six percent year to date. And of course many stocks are down a lot more than that, and that's just one headline number but to put that in perspective I think you know people were probably surprised to see equity is only down six percent thus far given how much volatility has taken place.
But you know we kind of came in this year thinking that stocks would probably be in for a tough first half and a stronger second half so it's kind of playing out maybe as expected but what do you see when you look at kind of how much the markets have moved, how much damage has been done to the technicals, and maybe what does that suggest going forward for stock prices?

Stephen Hoedt [00:12:54] Yeah, George, you know, when you look at what has occurred over the last few weeks, particularly the last two or three weeks, I mean, the volatility was crazy. We started to get, as we've mentioned on these podcasts and in other forums, some of the typical technical indications that the market was at least trying to form a tradeable low.
Namely, you know, when we got the volatility index spiking above 50, you know, historically it takes a lot to cause that to happen and the market's discounting a lot of craziness. And we've gotten that rally back over the last week and a half to two weeks. And the S&P 500 now is sitting at roughly $5,500, give or take a little bit, which happens to coincide with both the downtrend line from February connected through March and current, as well as the 50% retracement of the move from the February peak to the April drop.
So this is kind of an area where as a technician you would expect the rally to start to have to digest the recent gains and, quite honestly, it becomes a bit of a moment of truth for the market. So like if we're gonna move higher here and you know, see the market go up, say, past $5700 again and try to reassert the uptrend, we need to start to have to see some things happen. And we're getting, again, we're getting bits and pieces of it this week, but not across the board. And by that, I mean, you know, we want to see participation start to broaden out.
We've had some discussion in the media about Breadth Thrusts and things like this and you know there has been an improvement in some of the technical indicators that we look at in order to determine how broad this participation is and namely it's the percent of New York Stock Exchange Advancers that the folks who are focusing on those thrust indicators are looking at and there have been a high number of those in the last few sessions.
But we look at a breadth of, a number of, other indicators and for example, think 20-day highs for the market, you know, were only at 8%. We need to see that get up towards 50% to really start to feel like the market is in the process of turning. When you look at the percent of issues above their 20-day moving average, we're only at 70%. You know typically you want to see that get above 90% in order to have the market, again, signal that we're in that kind of all-clear phase.
The one clear positive though is sentiment continues to be terrible. So when you look at things like Investors Intelligence, which is a data set that I get every week, when you take a look at the bull-bear spread there, you're at levels where the sentiment continues to be terribly negative. So that is a clear positive. And in fact, we made a new low for the move this week in terms of negative sentiment. So negative sentiment and positive momentum can work together to push the market higher here. Just think that we have some more work to do in order to try to get us out of this kind of funk that we've been in. And, you know, maybe if we could get the folks in D.C. just not to say anything for a few days, we might be able to continue to have this rally.

Brian Pietrangelo [00:16:47] Great comment, Steve: tie down the rhetoric.
Speaking of a lot of things going on, next week is going to be a really important week for economic data, so for our listeners out there, you want to probably tune in to us on Friday, May 2nd to get the update.
And George, just give us a little bit of a preview, but think about key economic reporting data that's going to important to the Federal Reserve. So, on Wednesday next week, we get the first quarter GDP report out. We also get consumer spending. The all-important PCE inflation number, and then on Friday we get the employment situation which includes the new Nonfarm Payrolls report and the unemployment rate. All of that goes to the dual mandate for the Federal Reserve of maximum employment and price stability for their meeting the following week on the 7th. What do you think?

George Mateyo [00:17:35] Lots to digest, for sure. And you didn't even talk about earnings, right? And I'm not sure if people are paying that much attention to earnings stories as they were just a few quarters ago, but we've got a lot of earnings to talk through next week as well, including probably about twenty-five, maybe thirty percent of the overall market cap, if not more. I don't have the number in front of me, but it's pretty high.
Anyway, Brian, your question about the economic numbers. I would suggest that the GDP numbers are probably pretty well baked in the cake. You know, there's a lot of models that exist out there, and they're suggesting that the economy really kind of slowed down pretty significantly in Q1. Does it go negative? I don't know. I think it's going to be close, but I think it's gonna be kind of a softer print, for sure.
The bigger number that you identified, or the bigger indicator that we'll probably be watching and talking about this time next week is, of course, I think the jobs report. And that's going to be kind of front and center. And I think I have to look at the range of estimates, but I guess it's going to be pretty wide. I don't think we've quite seen the height of the overall economic impact from tariffs. So again, as I said earlier, in some of my comments, it feels to me like maybe we've kind of seen the peak of uncertainty in terms of the tariff conversation, but we're not quite to the point yet where we've seen the peak impact on the economy. And that's gonna take some time to ripple through.
And as you've talked about, Brian, and some of the conversations you had with clients, I know, you often talk about the fact that the market moves ahead of the economic fundamentals and it's gonna move kind of that direction for some time. Or in other words, we might kind of be in this kind of lull for a while, maybe call it two quarters, even, of kind of some squishy softish kind of numbers from the economy, but that actually could kind of be – you know the market could kind of be ahead of that by the time that we actually see some of those numbers kind of play out.
So again, I don't want to be Polyannaish about it. Steve's right to think that maybe we need to kind of have the Reddit columns come down a bit. And I still think it's fair to say that there's probably to do some back and forth. So again, we're not out of the woods yet for sure, but our method overall remains being kind of focused on things you can control. Think about how much liquidity needs-your liquidity needs. Can you maintain those? Can you meet those? Can you rebalance? Maybe after you've addressed the idea of having sufficient liquidity, could you put capital to work in this environment? And as we've suggested over the past few weeks, nibbling around the edges probably makes some sense as volatility continues to escalate. And then above all else, Brian, I think it's important to stay really diversified and stick to your overall asset allocation strategy.

Brian Pietrangelo [00:19:50] Well, thank you 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 will 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 [00:20:26] 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.