Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Hello and welcome to Truist Wealth's April Livecast, Navigating the Curveballs, The Seventh Inning Stretch Continues. I'm Sabrina Bowens-Richard, head of the Investment Advisory Group's Client and Advisor Engagement, and we're glad you could join us. 

When we released our 2026 outlook, The Seventh Inning Stretch, we talked about how the economic and market cycles still had room to run, but we could also get more curveballs, especially in a midterm election year. And so far this year, we've seen many of those themes play out – from tariffs, to disruptive technology, to geopolitical risks, including the most recent escalation in the Middle East. Today's discussion is guided by the questions we're hearing from you. What the war in Iran means for markets, how long the impacts may last, where the risks and opportunities lie, and how portfolios should be positioned.

We'll give you an update on our house views and what's changed. We'll walk through the latest developments in the Middle East and what it means for global economies and markets. We'll assess the U.S. economy along with how we're navigating opportunities in fixed income and equities. 

Joining me today is Keith Lerner, Chief Investment Officer and Chief Market Strategist; Mike Skordeles, Head of U.S. Economics; Chip Hughey, Managing Director of Fixed Income. And we're also pleased to welcome Eylem Senyuz, our Global Strategist and Georgetown Professor, who's been leading our work on the U.S.-Iran War. 

Now, before we get started, I just wanted to ask, what's one thing that's top of mind that our viewers should be thinking about? I'll start with you, Keith.

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

Well, great to be with you again, Sabrina. Great to be with the team. It's a real treat to have Eylem here, and I wish we had something to talk about this year.

One thing up front I would say is risks remain, but don't underestimate corporate America's ability to adapt. 

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

And Eylem?

Eylem Senyuz — Global Macro Strategist, Truist Wealth

Sabrina, thank you for having me. 

The geopolitical landscape is changing, and we're adding new chapters and new layers into it. But we started to learn with it—to live, to learn with it as well.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Mike?

Michael Skordeles — Head of U.S. Economics, Truist Wealth

Iran matters, oil prices matter, but there's a whole lot of other things that matter more for the U.S. economy.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

And Chip.

Chip Hughey — Managing Director, Fixed Income, Truist Wealth

I would say that the recent rise to higher yields is creating real opportunities in fixed income.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Well, with that, I'm looking forward to a very dynamic discussion with you all. 

Keith, we're just four months into the year and so much has happened. How is 2026 unfolding relative to the seventh inning stretch that you laid out earlier this year?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

We’re a little bit more than four months and it feels like we’ve had a full year already with all the headlines. 

I would say big picture relative to our theme, we're still tracking pretty well. You kind of mentioned it. We still thought coming into the year that the bull market deserved the benefit of the doubt, that we would see the economy continue to move forward, but also several curveballs. We just don't know what those curveballs are, but we know in a midterm election year there's greater policy uncertainty, and that's what basically that we're seeing so far. 

All in all, as we sit here today, despite all these curveballs and a sizable correction, the S&P 500 is back to a new all-time high. Global markets are up about 4 percent. Interest rates have been relatively well behaved. 

The main difference from the beginning of the year is oil prices are still in the 90s relative to the 60s where they began the year.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

So we've seen quite a bit of volatility this year. How does that look relative to history?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

The first thing I'll just point out is midterm election years tend to be more volatile because of what we just mentioned. We pointed that out in the outlook. 

But the other thing that I think would be helpful just for context-wise, because there's so much headlines, is we show this chart going back to 2009 of the S&P 500. We've had curveballs this year, but we've had a lot of curveballs since 2009. And the reason why we start with 2009 is that's coming out of the global financial crisis. 

Since that time, we've seen more than 30 pullbacks of more than 5 percent, so there's been something associated with bad news. But what's important for our investors, too, is over that time, despite all these different curveballs, the market has risen more than 1,300 percent. 

Then going more directly to your question, how does this recent correction look relative to those, well, the average correction during this time when we see these pullbacks has been about 10 percent. This one was 9 percent. Of course, some are shorter or deeper. Some are less deep. But overall, in context relative to history, it was actually somewhat typical, even though it may have felt atypical given the headlines and what was happening in the Middle East.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

So now that we've seen this nice rebound in the markets, many clients have asked, “Have the markets moved too far, too fast?” What's our take there? And for those clients who are sitting in cash, what should they be doing?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

Sure. And things have moved quickly. Just maybe to zoom out for a second is that back in March, we thought we were in a corrective period and we said we thought there was more downside. And then towards the lows, our work was saying that the risk-reward had improved. As soon as the ceasefire happened, because the market had reset, we saw this nice, sharp rebound. So we're up 12 percent off the low, so that's really extreme. 

But again, zooming out, this chart that we're showing is, even though the market is up a lot in a short period of time, if you look back since October, the last five and a half months, we're only up about 3, 3.5 percent, so we're far less extended. 

So the way I would think about that is, we ultimately still think this bull market deserves the benefit of the doubt. When we see this surge in momentum, over the next couple of weeks or next month it's not unusual to see some back end filling, or even maybe giving back a little bit of the gains. But over the next 12 months, the probabilities are still with you for higher moves. So somebody who has cash, we would still be working that in and as we get some pullbacks we would likely be more aggressive there as well.

But again, I just want to highlight, again, we're only up 3 percent over the last 5.5 months. We had an overshoot on the downside, and now we've corrected that to the upside.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

So it sounds like these short-term pullbacks are expected, especially in a midterm election year. This really just looks like a typical bull market pause and reset. It looks like we still can see some more upside, although it won't be necessarily in a straight line.

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

That's right.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Before we bring the broader group in, just walk us through our current house view and what's changed this year.

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

Sure. One thing we talked about at the beginning of the year is we expected more curveballs and sometimes that obviously presents risk, but also opportunities.

I think the big picture, before talking about the changes, just where we stand today, big picture we have still a tilt towards equities relative to fixed income and cash. But Chip's going to tell you about opportunities we are still seeing in fixed income. 

Globally, we still have a tilt towards the U.S., but we are globally diversified. In fact, one of the changes we made earlier this year was upgrading our view of emerging markets after being much more negative. We still think there's opportunity there. 

And then really, when there was uncertainty around oil prices, interest rates rose and with that we increased our view or upgraded our view of U.S. high yield, and also, we were seeing more opportunities in longer dated fixed income, which again, Chip will talk about. 

And then one final thing that we did in late January was we actually downgraded gold near the highs and that proved to be very timely. The reason why we downgraded after being very positive is it just got the most extended to the upside relative to its trend since the 1980s. So we just thought it was vulnerable.

That's why in some ways people have been asking like, “Hey, shouldn't gold be one of the better performing asset classes during a war?” Well, the problem this time was it was so extended heading into this, it was a bit more of a sell of the news type of thing as well. 

So all in all, I would just say we still see some opportunity there longer term; at least it's corrected at this point.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

That's very helpful context. 

Another question that we get is around sectors. What sectors do we like in this environment?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

I'll keep this high level for this discussion. But big picture, we still like technology. We've liked technology for several years. I always talk about each bull market has a dominant theme and the dominant theme for this bull market continues to be AI and tech. But before this recent move back up in tech, it had underperformed this year and I think what happened, last year coming out of that tariff low, it really outperformed. So the last four or five months it's been digesting those gains and that dominant theme got pushed back as there were some questions around AI and disruption. But now it's coming back to the forefront, so tech is still something we like a lot. 

And then some of these adjacent sectors like industrials and materials that help with the build out and also benefitted from this One Big Beautiful Bill as well.

And then more recently, more of kind of a hedge and portfolio diversification, we upgraded our view of energy or the energy sector on the pullback. The thinking there is that if we start to see things flare up again, energy will likely hold up better, where what we're seeing on some days, when energy is doing well, other sectors are mostly down and vice versa. So it provides, as I mentioned, a partial hedge towards what we saw as a very fluid situation in the Middle East.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Thank you for that setup. 

Speaking of energy, I'll turn to you, Eylem. You've been really leading our work here on the Middle East. Where do things stand between the U.S. and Iran today?

Eylem Senyuz — Global Macro Strategist, Truist Wealth

Sure. First of all the good thing is the diplomacy is working. The U.S. is saying that they're ready for another round of talks and the Iranians are dragging their feet. But eventually they will come back to the table because they need this deal as well. 

But of course, there are lots of unanswered questions. The first question is, the ceasefire that we are in today, it looks like there's no end date, which is great, but we don't know if it's going to last or not. The Strait of Hormuz is closed; we don't know when it's going to open. It is a big issue. 

We don't know if the Iranians will agree on the enrichment limitations that they will be facing.

And the last one is, this is a new question that we didn't have in the past. Is the Revolutionary Guard Corps running the country or do we have any political class left in Iran so that we can have a deal with them? 

The good thing is both countries are getting closer to have a peace deal and it looks like we moved away from the peak conflict period, which is good. But we still have a good amount of unanswered questions and the parties are far away from having a deal. 

The nuclear enrichment was a big issue in 2015; it still is a big issue.  Strait of Hormuz was not an issue in 2015, you remember. And it is an issue because now the Iranians know that they can use this as a negotiation tool as well.

Then the sanctions relief, to be honest with you, it will be the easiest one to solve. But we'll see if it's going to have a meaningful effect to bring the Iranians back on the table. 

Lebanon is a big issue for Israel and they have to agree on the terms as well.

And then the last one is the Iranian missile program is important for the U.S., of course, and for the region. And not only that, all the proxies that Iran is supporting, I'm talking about Hezbollah in Lebanon and Hamas in Gaza and Houthis in Yemen, that needs to stop as well. 

So, we'll see if the parties will come up with solutions for those problems.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

So Keith, just based on what Eylem has outlined, it sounds like we have more questions than answers. So why is the market moving to new highs?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

It's actually one of the main questions I'm getting right now. Like, we haven't solved anything, so why is the market moving ahead? But we have to remember this is typical action for the market. 

The market waits for an idea of what is peak uncertainty. It doesn't mean that everything is resolved. Think about the last, let's say 10 years or so. Coming out of COVID, markets bottomed well before we had all the answers. And more recently, think about last year. It was about a year ago we had the tariff shock and the markets bottom had a big move up on the day that the administration talked about a pause in the tariffs.

So a year later, there's still a lot of lingering concerns and questions around tariffs, but guess what? The market has moved on. 

So, that's the other thing. By the time there's full clarity, the market has moved on. So at this point, it feels like it knows where the peak is and now it’s starting to focus on other things beyond just Iran.

But I will say, it doesn't mean that as we go through this sloppy period, you could certainly see some headline-driven market moves. But ultimately, the market is telling you that they think we are going to move towards some type of deal or something the market could be comfortable with.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

I'll just shift back to you, Eylem. As we look around the globe, who is most negatively impacted by this situation? 

Eylem Senyuz — Global Macro Strategist, Truist Wealth

Sure. I mean, follow the arrow. Look at the arrows that are going into. The oil and the energy and petrochemicals produced in the Middle East goes to Asia. It’s the closest destination for the Middle East sellers. And the energy deficit countries – China, India South Korea, Taiwan, and Japan, they're forced to pay higher prices or they have to curb their demand, or they have to find additional producers.

The U.S. is a little bit insulated to this story. And I'm sure my colleague Mike will talk about that as well. It's mostly an Asia problem right now, but eventually it could come to our parts of the world as well.

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

Just real quickly, Sabrina, I will say before this, international markets were outperforming, and now the U.S. markets are outperforming because of what Eylem just talked about, a bit more insulated relative to the rest of the globe.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

As we think about this situation, do we see any short-term versus longer-term implications as to how this all will play out?

Eylem Senyuz — Global Macro Strategist, Truist Wealth

Sure, for the short term, there are visible energy and petrochemical shortages in countries in Asia, and a couple of them already announced some measures, like working from home recommendations or shortened work week and stuff like that. If the current conditions or current situation continues, we may see the similar stories in other parts of the world as well. Not immediately, but it may come to our side as well.

In the longer term, there will be a higher premium to be paid for the product that is produced in the Middle East and shipped to overseas markets. And the damage that happened for the infrastructure that the Middle East is having, especially in Qatar, we have also in Bahrain and Kuwait, and also in Iran, it needs to be fixed. So the future deliveries of energy will be in question for many years to come.

But just to give you a bigger picture for the world economy, if you look at the world economy, in 2028, the total GDP was $118 trillion. And if you look at the same number for this year, the anticipated figure is $126 trillion. So from 118, we moved to 126, so there's $8 trillion extra money that will be created globally. So who's going to create that? 

I would say a significant portion of it will come from the U.S. U.S. growth rates are higher than averages and higher than anticipated figures. And we have a couple countries in Asia, especially India is growing really fast, 7 percent a year, for not only this year, for many, many years to come.

And for a change, Latin American countries are doing quite great this year as well. 

And on top of this, we have inflation. And inflation in the U.S. is higher. It's getting higher in global markets as well. And when you look at the energy spikes and fertilizers issues that we are facing and agriculture prices are moving as well, so there will be an effect coming from the higher inflation to the global GDP.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Just zooming out beyond Iran, what other issues should investors be thinking about as it relates to the geopolitical landscape?

Eylem Senyuz — Global Macro Strategist, Truist Wealth

Remember the geopolitical strategic battle we have is with China. China is our number one competitor militarily and also geopolitically. And all the events that happened this year, geopolitical events that happened this year, starting with the military excursion or the surgical strike that we had in Venezuela to take the Nicolas Maduro out is connected to that story. And then we had a mini crisis in Greenland. That's also connected to this story. And now we are in this Iran situation. It's also connected to that bigger picture. 

The U.S. needs to secure the resources of the planet and also the energy and the trade routes, and more importantly, global financial system needs to run with the U.S. dollar. But U.S. dollar needs to stay as the reserve currency and also the preferred trade currency. 

Of course lots of things are changing. We watch the global picture and geopolitical events and more chapters will be written and additional layers will be added. But we started to learn how to live with it as well, which is a kind of good story.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Thank you for that. Just making sure I understood you, both Iran and the U.S. want a peace deal. Sounds like near term, the biggest implications are in Asia.

Eylem Senyuz — Global Macro Strategist, Truist Wealth

In Asia.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

But if this gets prolonged, then we could see other countries get hit. And inflation is not just a U.S. story. It's a global story, so it sounds like the situation still remains fluid.

Eylem Senyuz — Global Macro Strategist, Truist Wealth

You're right.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Absolutely. 

We'll shift to you, Mike. Eylem walked us through like the global flow of oil and I'm sure all of us are feeling it at the pump. How do these higher oil prices affect the U.S. economy?

Michael Skordeles — Head of U.S. Economics, Truist Wealth

As Eylem pointed out, the biggest impact is outside of the U.S. Ninety percent of U.S. crude oil supply is from North America. The vast majority is from inside the U.S. The balance is generally from Canada. And so we're not impacted on the supply side. That said, the price of oil is set globally and so the much higher prices, as you alluded to, we're feeling that at the pump.

The most direct way, other than at the pump for consumers, is also diesel prices. So diesel prices, national average is above $5. That is embedded in essentially every good that we consume in the U.S. because, not just the last mile, but getting to warehouses, getting to stores, getting to us, all those goods are trucked and that's using diesel. So again, those higher diesel prices get embedded in there. 

That said, there's indirect and Eylem alluded to some of it. It's not way in the future. It's today. We've already seen nearly all of the plastics manufacturers or plastic resin makers add a $0.20 per pound surcharge because of the higher crude oil prices. So we have far-flung supply chains all over the world. Whether it's manufactured in the U.S., pieces and parts come from all over the world, especially those plastic pieces. But as Eylem mentioned, things like fertilizer and other things, they won't impact this growing year, but they will definitely be passed along in the coming years. 

Big picture though, as long as we stay essentially below $100 for the balance of the year, I think there's not going to be a problem at all. It takes a small bite out of things for consumers. Yes, there's a shift and gouges other categories of spending because consumer budgets are only so big. They're not unlimited. So you're spending it on oil; that means you're probably not going out to eat as much or doing some of these other things. That said, the consumer has remained incredibly resilient.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Let's just take a step back. I know the war has really dominated headlines recently. But as you think about the U.S. economy, how have your views changed throughout the year?

Michael Skordeles — Head of U.S. Economics, Truist Wealth

Well, so kind of staying along with the theme that we've been using, which is a little more car analogy, partly because of gasoline prices among other things, but using this kind of stoplight. And so the heightened geopolitical uncertainty, not just for business and decision makers, but also for consumers, it makes you think twice about the purchases that you're going to make and, again, gouging other categories. 

But I would point to the bottom, the green light, if you will. Three of the four catalysts that we expected coming into the year are intact. These are things like tax changes, so much bigger refunds. So far, they're running about 16 percent higher than they were. We think that's going to continue as we continue to get the numbers for the rest of tax refund season. 

Additionally, the people that owe money, those numbers are significantly down as well. So you don't owe as much, and then other people that are getting refunds, those are much bigger. 

The other one, Keith mentioned a number of times, AI, that continued AI and tech spending, but other infrastructure that goes with it. So there's $1.1 trillion worth of utility CAPEX that's happening in the next five years. That's also not included in that CAPEX number, so we've got those tailwinds helping us as well.

And then last, but certainly not least, is wage and income growth. Wages are growing faster than inflation. That's helping consumers navigate through these uncertain periods.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

I know you talk a lot about the job market. Tell us what our views are there.

Michael Skordeles — Head of U.S. Economics, Truist Wealth

Yes. So, again, this one foot on the gas, one foot on the brake because of some of these catalysts, but then the uncertainty. One of the things that's added to this kind of push on the brake a little bit has been the job market.,

Really, since Liberation Day, there's been a lot of uncertainty and businesses have been kind of depending on the month, adding jobs or taking away jobs. Additionally, we've had this DOGE federal job cuts that happened in 2025. That was a big piece of it as well. But we've oscillated for the last 10 months between job gains and job losses, job gains and job losses. So again, that's contributed to this one foot on the gas, one foot on the brake. 

More importantly, though, when we look at the private sector and the vast majority of the 159 million, 160 million workers in the U.S. workforce are private. It's been running, the six-month average, about 52,000 per month, so we're adding 52,000 new jobs on the private side. That's the more important trend. 

So again, jobs remain the key. I think we're going to work our way through this. As we move from the spring months into the summer and activity naturally accelerates, we're going to see a little bit better and more consistent job growth as we move through the year.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

I want to touch on something that you mentioned earlier about wage gains outpacing inflation. Are you concerned that inflation will stay elevated in this environment?

Michael Skordeles — Head of U.S. Economics, Truist Wealth

Well, direction of travel is definitely, it's been—it's bumping higher. We saw that in the March numbers. We think that's going to continue as we move from the April, May, and probably into June. But as Eylem was saying, in our base cases there's going to be resolution here. It won't be full resolution. And it's going to take years to work through some of the impacts to oil infrastructure globally. Again, rebuilding some of these refineries and some of these other plants, processing plants, that's going to take years. It's not a week's sort of situation. That said, we've seen oil prices already drop into the below 100. They're running about $90 today. But we've dealt with higher or elevated crude oil prices even in the recent past. 

We had the spike in 2022 after the Russia-Ukraine invasion, but we averaged $75 a barrel for the balance of ‘22, ‘23, and into ‘24. It was 2025 where they actually fell a little bit lower, into the 60s, and now we've jumped back into the 90s. 

So again, we can manage through that as long as we're not talking about $100-plus, $120 oil per barrel for the balance of the year.

Again, the economy is going to be able to work through that.

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

Mike, you also mentioned before that the economy is less sensitive to oil prices.

Michael Skordeles — Head of U.S. Economics, Truist Wealth

Absolutely. And we kind of flashed up a chart up there. But there's a lot of discussion about taking things back to the 1970s, examples there. The U.S. economy and U.S. consumer behaviour and how efficient we are with crude oil and gasoline and those sorts of things, and energy generally. The U.S. consumer only spends about 3.6 percent of their overall spending on energy. I know that sounds like a low number, but when you really think about it, even in current times, 22 percent of vehicles, U.S. passenger vehicles, cars, about 11 percent are EVs. The balance of that 22% are hybrids. Take someone like Toyota, the largest manufacturer in the world for automobiles. Their entire lineup is all hybrid today. Most of the others have at least part or at least half that is also hybrid. 

Again, you're using less energy, less oil, plus you have things like LED lighting, high-efficiency washers and dryers, all those sorts of things that contribute to, we're using a lot less energy than we were in the past. So, again, comparatively, the consumer can make it through and the overall economy, I think, can make it through.

It doesn't mean it's not a headwind. Certainly for lower end consumers, an extra 40 bucks at the pump, which is about the price difference that we get in the March month, that's a lot for people. You start stacking that up month after month, that's a headwind for certainly lower-end consumers. But for the vast majority, they don't like it, but they're going to pay it.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

So it sounds like Iran matters, but other things matter too. 

As we look at the economy, we're still expecting modest growth of 2.2 percent, so certainly not a collapse.

Michael Skordeles — Head of U.S. Economics, Truist Wealth

If we would have been helping out all cylinders and we didn't have the Iran situation and higher crude oil prices, we would have been growing a lot faster. But that said, those three of the four catalysts—the other being the Federal Reserve being able to lower rates, and we do think that that one's more delayed and not cancelled—but Chip will talk more about that, I'm sure. But at the end of the day, we have these catalysts that are helping the U.S. economy power through, whether it's the Iran situation or any of the other uncertainties that we're faced with.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

That's a good pivot to you, Chip. Coming into the year, you discussed fixed income as a consistent hitter. You talked about being patient and we would see opportunities arise, and we'll go through some of those shifts that we've made, but before we do that, let's talk a little bit about the Fed. 

Just in light of what Eylem has talked about, the outlook that Mike has given, where do we stand with our views on what the Fed could do? Can they still cut rates at this point?

Chip Hughey — Managing Director, Fixed Income, Truist Wealth

Well, market expectations around the Fed have been really volatile these past six weeks. There's no doubt. They've gone from projecting multiple cuts to actually pricing a Fed rate hike, to now basically saying that the Fed is likely on hold for the rest of the year.

Our outlook has been steadier. It's been a bit more consistent. First off, I would just say straight out that we do not expect the Fed to raise the Fed funds rate this year.

Second, in fact, we expect gradual easing to return later this year, but the resumption of those rate cuts has been delayed by the Iran conflict and by the resulting uncertainty around near-term inflation. But we still think that the Fed is trying to get the Fed funds rate down from its current target range of 3.5 percent to 3.75 percent, down to roughly 3 percent. But there's an important implication there that if this holds true, if our outlook is correct, the Fed has already delivered the vast majority of the amount of policy easing that we expect. We're only a couple of rate cuts more away from where we think the Fed will actually try to pause because they'll feel like it's either accelerating or slowing the economy.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

So our position has remained the same the whole time. We think the Fed still could cut rates, but obviously delayed given everything that's going on. 

We've made some changes in the fixed income space, and one of the first ones I want to talk about is our duration call. Just walk us through the views on that.

Chip Hughey — Managing Director, Fixed Income, Truist Wealth

Sure, yes. The Iran conflict, these inflation concerns that we've talked about a lot today, they push intermediate and longer yields sharply higher, right? So the 10-year yield, it moved well above our assessment of where its fair value should be. So we upgraded our view of duration at that point from neutral to more attractive. That's kind of technical. What does that actually all mean?

We see a lot of fixed income investors still very concentrated in cash, in money market funds, in really short-dated bonds. That recent rise in yields that we have seen actually created a better entry point to add some longer-term exposure to complement the shorter-dated securities. And we think, for instance, that the three to 10-year range of maturities on the yield curve, it's a nice balance of now attractive income and also a little bit more moderate interest rate sensitivity.

We also think—and this is part of our view too—is that the 10-year is going to find it difficult to move on a sustainable basis much above this 4.5 percent threshold. We're at about 430 as it stands today. And that's really for two reasons.

One, over the past few years, the equity market has sort of bristled when the 10-year starts flirting with that 4.5 percent range. Kind of generally speaking in that region. So that's one thing that has capped yields in the past.

And two, at that level of yields, we're likely to see concerns around growth pickup a little bit and that also serves to put downward pressure on yields, capping those moves higher. 

The last thing I will say though against all of this is that even with the outlook for rates, we think it's going to be inside the context of still high interest rate volatility. The intraday swings in interest rates that we have seen over the course of the past six, seven weeks have definitely picked up. We don't think that that's going to be solved overnight, so we are preparing for that.

Michael Skordeles — Head of U.S. Economics, Truist Wealth

I was going to just say, it's similar to the equity markets in that the midterm election year policy uncertainty affects the 10-year as much as it affects the stock market. 

Chip Hughey — Managing Director, Fixed Income, Truist Wealth

Absolutely. That's right.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

We also upgraded our view of high yield.

Chip Hughey — Managing Director, Fixed Income, Truist Wealth

Yes.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

I know a few months ago, you talked about just having patience and it looks like that patience has paid off. Just talk a little bit more about that upgrade.

Chip Hughey — Managing Director, Fixed Income, Truist Wealth

Sure. We upgraded our high yield corporate bond outlook and it was really for three primary reasons. The first being, it was the highest absolute yields in the space that we had seen in about 10 months. You can see it in the chart on the screen. The index yield for high yield, it touched about 7.7 percent. So just on an absolute basis, an attractive entry point to capture some of the highest yields we'd seen in a while, right? 

Secondly, credit spreads started to better reflect the risks that we as a team here had identified. So what are credit spreads? I'll take a step back. 

That is simply just the additional yield an investor is paid to invest in U.S. companies relative to U.S. treasuries, right? Earlier this year, spreads were really, really tight. They were very, very low, and we just said that the risk reward there was unattractive and we really advocated for patience around the riskier corners of fixed income and that included high yield.

In March, that changed, right? This geopolitical inflation uncertainty, it pushed spreads higher, right, from a higher absolute level, but then that spread also was wider as well and that also contributed to a more compelling entry point as well.

And third is what Mike just laid out, is we do not expect a recession in 2026, right? That's a really important component to high yield. It tends to really underperform when there's economic stress or perceived economic stress from market participants. That's not in part of our view. That also supported the upgrade to our view of high yield. 

What I would say though is that this is not to signal to take aggressive risk-taking in fixed income,. Only that these conditions made it that it was appropriate to incrementally upgrade our outlook for high yield into a more positive view.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

It sounds like fixed income is doing its job again and these higher yields just really created a better entry point for us. 

Chip Hughey — Managing Director, Fixed Income, Truist Wealth

That’s right. 

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

All right. With that, I want to turn it back to you, Keith, and get a little bit more colour on the equity market.

So much focus has been on Iran and just like with the economy, other things do matter. What are some other factors that folks should be paying attention to as it relates to the stock market?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

I think you laid that out well. I mean, again, Iran definitely matters. There's definitely risk, but it's not the only thing that matters. And if you said to me, “Keith, what's the one thing that matters the most?” I would say corporate profits for the stock market. It's not the only thing that matters, but it's one of the most important ones. And that's what this chart reflects. It looks at the S&P 500 overlaid with the forward-earning estimates as well. 

If you think about it more simply, if you're a business, the more money you make, the more valuable that business becomes. What you're seeing right now in the stock market, even during some of the concerns that we've seen more recently, we're seeing those forward-earning estimates continue to show momentum, that new 52-week highs, but we're also showing that in mid caps, small caps, international as well. 

I think it's also—you asked in the beginning, what's one thing to think about as a tagline? I think it's important to remember that our companies have been battle-tested, right? This isn't the first shock they've had to deal with. As they go through each shock, they're better prepared for the next one. It doesn't mean they can't—some businesses deal with them better than others, but what we've seen out of each of these shocks is that profits have rebounded. 

And the other point—and this is more for the S&P 500, because the S&P 500 isn't the economy. If you think about the stock market, yes, I would say, if you think about the tech sector, the communication service sector and then some adjacent stocks, you have about 50 percent of the stocks that are really driven by technology.

So in some ways, what's probably going be more important to see if this market does have upside, if the bull market deserves the benefit of the doubt is that we see this AI theme continue for the overall market. We'll see several companies coming out next week as well, but we believe this cycle has further to go.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Let’s talk a little bit more about tech. In this rebound, tech is up, what? Twenty percent off the lows? Do we still see any upside for tech?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

The short answer is yes, but you just said we went up 20 percent in a short period of time. Things aren't going to go in a straight line. But this is the one area that we really had highlighted quite a bit during the correction period. As I mentioned before, every bull market has a dominant theme, I'll repeat, and this one is still tech and AI. This chart is very telling. Because markets are all about expectations and how things come in relative to expectations. This chart is a PE chart, so the price-to-earnings for the tech sector, and it goes back to 2019. As we've had different shocks, it shows each time how much has the tech sector been revalued down.

You can see going back to COVID, we saw a revaluation of 31 percent. The current revaluation was 37 percent. This is the most extreme for any period. I would argue that COVID was more uncertainty than even today.

Then you look at 2022, we had a bear market. The Fed was raising rates at the quickest pace since the ‘80s and we saw a pretty healthy correction there as well.

And then last year during the tariff shock as well, we saw the tech sector's valuations come in by 34 percent.

So again, this more recent period, we went from a 32 P/E to a 20. That's a 37 percent reset in valuation.

So I would argue back in October, when the market kind of peaked, we had really high expectations. At the lows, we had relatively low expectations. And the premium for tech to the overall market had compressed to the lowest level that we saw in over a decade.

So now we've bounced back, but you can also see we're still far away from the highs. I don't think we're necessarily going to get to the highs because there are some questions around disruptions, semiconductors versus software. But ultimately, we are seeing the earning trends in tech still by far the strongest out of any sector.

So, a long way of saying, we ultimately still think this is a leadership part of the market. And even if it has a rest, even if it has a bit of a pullback first, we ultimately think there's still more upside in the cycle.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

I want to talk a little bit about international stocks, which were leading before this pullback. What is our view there?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

Yes, that's right. International was really—performed well last year and heading into this crisis, I think they've lagged a little bit on a relative basis for some of the things that Eylem talked about, but they're less insulated relative to the U.S.

And then this other chart that we're looking at is global earnings. We talked about it's all about earnings. It's not all about earnings, but it's an important part.

I will say the positive story though is that we're still seeing the U.S. lead in earnings, so we still have a bias to the U.S. But over the last year, we have increased that international and you are seeing some favorable trends in Europe, in Japan, in emerging markets. Notably, you see the yellow line is emerging markets. Those earning trends have really hooked up and that's part of the reason why we added to emerging markets earlier this year. 

So the way I would think about it is keep the bias towards the U.S., more favourable within international, become a little bit more favourable on emerging markets this year because they also benefit from AI theme. Eylem, you mentioned in Latin America we're seeing some improvement there.

Eylem Senyuz — Global Macro Strategist, Truist Wealth

Yes. LatAm is doing much better this year.

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

Yes, so, again, incrementally. 

And then there are wide outcomes right now as well. I mean, in a much more favourable outcome, the areas that have been hit the hardest may rebound more, so you don’t want to just forget about this. And there's also some questions about the dollar’s status as well. 

So globally, again, I guess I would say is global diversification, still have a modest tilt towards the U.S. But again, keep an open mind beyond just the U.S. as well.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

So, despite these curve balls, markets have held up well. Pullbacks are normal. Earnings are key as we talk about the stock market.

I know we've covered a lot of stuff today. Do you have any key takeaways, Keith?

Keith Lerner — Chief Investment Officer, Chief Market Strategist, Truist Wealth

Sure. Maybe I'll end where we started, going back to this theme like curve balls. We are in a midterm election year. We're going to see rhetoric and policy uncertainty ramp up. So do expect more curve balls to come. And for us—and there's risk with that, but that also presents opportunities as we just discussed some of the changes that we see.

But walking through today, I think, Eylem, you did a fantastic job just kind of walking us through where we are in the state of Iran and U.S. Diplomacy is good, but there's still—you also mentioned there's still a lot of open questions. 

Mike walked about what the impact of energy to the U.S. economy. There's some impact, but it's not the only thing that matters. And we still think the U.S. economy grows around 2.2 percent. Don't forget about some of the other things that are driving the economy as far as wages above inflation, and so forth, and the AI boom that continues. 

On the equity market, we still continue to say the bull market deserves the benefit of the doubt. It's not going to be a straight line up. We're likely to see more pullbacks, but again, I think the bull market, again, even from following this correction has earned that benefit of the doubt.

And then Chip did a really nice job of laying out this reset higher in interest rates has presented opportunities as well and we’re going to look for other opportunities as the year progresses as well. 

And then lastly, as we write our monthly Navigator, I always end by saying, continue to follow the weight of the evidence, keep an open mind and we'll keep our clients informed as our views evolve and we see some of those tactical opportunities or growing risk that changes our view.

Sabrina Bowens-Richard — Head of IAG Client & Advisor Engagement, Truist Wealth

Well, thank you for that recap. 

What I heard today is stay disciplined, stay flexible, and stay invested. 

Keith, Eylem, Mike, Chip, thank you so much for sharing your expertise and your perspective with us today.

We’ve covered a lot of key themes to help you navigate opportunities in 2026 while staying flexible as markets evolve. To dive deeper, you can access the charts that we shared and explore additional insights in Truist Wealth's monthly publication, The Market Navigator, available through your advisor. 

Now, we know you have unique needs and your advisor knows you best, so we encourage you to connect with your team to discuss how these strategies align with your goals. 

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We look forward to continuing this conversation during our next Livecast in July.