Navigating Today's Market: Insights from Charles Schwab's Kevin Gordon | June 17, 2026 Webinar

Hey, Michael. How are you? Thanks for having me. It's a pleasure to be here.

Sure. So I think if you look at the headline level, the 30,000 foot view for the economy, you could make the argument that it has largely brushed off any concern from the war. There's a few reasons for that. Mainly the fact that we came into this year with a pretty significant oil supply in terms of inventories. So that drawdown has been, yes, very severe, not just in the United States but across the world. But that has really cushioned against the sort of major blow that you would see from oil prices. Not that oil prices and their spike haven't impacted the economy because certainly the broader consumer has felt that. But when you kind of bubble it up to the surface of GDP and non-farm payrolls and the unemployment rate, all these big macro statistics, the economy has looked, you know, relatively resilient. Just the jobs data alone in the past 3 months, we've created almost 600,000 jobs in the US and the unemployment rate has been unchanged at 4.3%. That's pretty impressive when you think about the scale of the disruption of the oil shock.

And now, as you mentioned, if we do get some sort of framework of an agreement and of a deal, that in and of itself is not opening the floodgates to, I think, an economic boom and certainly not a boom for the consumer, but of course it's a step in the right direction assuming that all goes well in terms of less conflict, hopefully no conflict, moving forward. And then from here, certainly a series of months to reopen the Strait of Hormuz fully and have ships go through that are sort of unaffected by and not impeded by either side. So I think that's really the key now moving forward is seeing what does the traffic resumption look like because so far it's still basically zero. Are there captains who are willing to get on ships and willing to sail through? Are those ships insured? Has Iran cleared all the mines in the straits? So there's a lot of unanswered questions that come along with this and we'll get hopefully more on Friday when this agreement is supposed to be signed.

But I would think about the economy in sort of two different speeds. There's the speed that I mentioned in terms of the broader macro, but there's also a lot more pressure on the consumer and that has really been the weaker part of the economy. But even within that, and last point I'll make on this, there's also sort of a two-speed situation happening where if you think about the consumer in terms of income and then consumption, so what are they making, what are they spending from an income standpoint, real wage growth has been negative for 2 months, not surprising because of how sharply inflation has risen. But if you look at the consumption side, inflation-adjusted spending has still been positive and it's been relatively resilient. Even this morning, we got retail sales data for May, and that's reported in nominal terms, but even if you adjust it for inflation, it was still positive.

So what's happening there is there's a pretty strong wealth effect at play. Certainly when you go up the wealth and the income spectrum, people who have made a lot of money in asset markets and particularly the stock market have continued to hold the economy up. But then there's also the fact that the savings rate has come down significantly in the US. So even for those who are not benefiting from this asset boom, we have seen a pretty significant drawdown in savings. So I think that this agreement is happening at the good time or the right time in the sense that if energy prices continue to roll over, it probably gives the broader consumer time to rebuild some of those savings and some of that cushion. So that's one of the reasons that I don't necessarily think this leads to some boom in consumption. And actually, I wouldn't be surprised if you saw a little bit of a pullback in consumption. Still positive, but I wouldn't be surprised if that growth rate slipped a little bit.

So the way we see things evolving moving forward, as long as you still continue to see this sort of relative stability in the labor market, where job growth is net positive, the unemployment rate doesn't tick higher, and you still have a relatively strong business capital spending cycle, mostly on the AI side, growth can continue to look relatively solid, probably driven more by the business investment portion than the consumption portion. But that's sort of how we see things evolving for the economy for the rest of the year.

Sure. Yeah. I mean, it's pretty remarkable. You know, I'm a big economic history nerd, so I study cycles religiously and I, you know, just all day, every day. And what I find most interesting about this cycle that we've been through in the past couple of years is that if I just showed you a chart that compared the unemployment rate in terms of the length of time that it was rising, so from start to finish, from trough to peak, you would look at the increase that we've had over the past several years and you would compare that to prior cycles and it lines up, you know, pretty much in line with other recessions. You would say, 'Oh my gosh, definitively we are in a recession.' But if I showed you that against the magnitude of the increase, it is completely at odds with every other cycle and every other recession that we've had.

So in the length of time that we've seen the unemployment rate rising, that is recessionary. But in terms of the magnitude, it's not recessionary at all. So if we have seen the peak in the unemployment rate for this cycle, which is, I would say the odds are probably better that we have, but that would be definitively the most unique labor cycle that we've seen in this country because it hasn't happened at the broad level. You haven't seen these mass layoffs that typically give you that domino effect of consumers pulling back on spending because they've been laid off, business revenue then getting hurt, and then that causes sort of that feedback loop that tends to result in a recession. It hasn't happened that way this time.

We've gone through a series of rolling recessions in the US, which frankly started back in the 2022 to 2023 time frame when manufacturing was first falling into a recession. Then it sort of spread into the other areas that are thought of as kind of white collar, professional and business services and financial services and tech. Those areas are now getting hit more on the labor side as manufacturing starts to recover a little bit and you have these other areas like health and education services which continue to be just these amazing job creators. So all of that is sort of happening under the surface as the broader unemployment rate has kind of crept, stabilized a bit, moved largely sideways over the past several months, which again is this unique phenomenon that we've never really dealt with before.

So I think it makes sense given how unique the cycle has been post-pandemic. But it also has created a lot of this confusion over where are we in the cycle? Is it the case that because the unemployment rate has seemingly peaked, does that mean it's about to move lower? And then maybe that becomes an inflationary problem. All of that sort of remains to be seen. And I think that is kind of one of the bigger problems that confronts the Fed because if you do have the labor market that starts to retighten a little bit or at least show signs of that, then you potentially have an issue from a monetary policy perspective where they have to entertain the idea of rate hikes. And they've already shifted in a relatively hawkish position. We'll get a lot more answers today after the Fed meeting and the press conference from the new chair.

But I think that's a dynamic to keep in mind is the fact that because this is such a unique cycle, we don't really have a lot of comparisons or historical comps for something like the unemployment rate and also something like inflation. Because you're seeing a lot of inflation being generated from what's going on in the AI space. The missing component has been that wage-related labor inflation. So that is kind of, to me, that's actually the key for the rest of the year is how much does that come back online if at all, if you do see a retightening of the labor market and if labor demand starts to come back strongly.

Yeah. So I think if you looked at it in terms of growth and inflation, growth, the tariffs have largely had no major impact on US growth. You could make the case that we had that slowdown in GDP last year. Not that it went negative, but slowdown into the fourth quarter. Some of that was actually more so to the government shutdown that we had, that record government shutdown that we had. So that kind of created almost a little bit of a mirage of what was going on in the economy. So I think from a growth perspective, the tariff impact is behind us.

Even from an inflation perspective, if you were looking at CPI on a year-over-year basis, which is how most people on Wall Street tend to think about it, the goods component of CPI and the core goods component, so taking out energy, that has probably seen its peak for the cycle. I'm assuming you don't get another huge slate of tariff announcements, which you can never be too sure these days because you really never know in terms of policy. But if that is the case, even as the administration kind of starts to rebuild the tariff wall a bit with these other avenues, Section 122 or 301 or 338, whatever route they go down, assuming we get that rebuilding of the tariff wall, not one for one, but if it goes back up and you see the effective tariff rate go back up, you probably still have some tariff-related inflation pressure for the goods portion of inflation, but I don't know if it gets us back to the peak that we saw last year.

So that full pass-through for tariffs is probably behind us. So the peak impulse, I would say, to the upside is behind us, which is good news for year-over-year inflation. Not so good news for that lingering inflationary pressure that is still with us in the goods portion of CPI. So all made more difficult by the fact that, number one, we've had this energy shock earlier this year. So that's put upward pressure on headline inflation. But number two, and I think this is a much bigger part of the discussion and it's going to be a bigger part of the discussion for inflation assuming energy now starts to roll over, you do have this AI-related demand surge that's happening in these key areas, software, hardware, with computers and equipment, things that are related to anything infrastructure in terms of power and utilities, that is all now starting to look pretty hot within the inflation data.

So you have that along with potential for some little heat in some reheating of the tariff-related inflation and that's sort of creating again a difficult backdrop for the Fed. So I don't really see the tariff outlook changing in terms of us living in this higher tariff world. But we have to, I think it's also worth keeping in mind that we're sort of past that peak impulse in terms of tariffs, major upward pressure on inflation and that big boost that we saw last year.

Yeah. So our fixed income team is pretty much in the camp assuming you don't get any major recessionary dynamic that emerges where it would pull yields lower and assuming you don't get any major inflation impulse again. Again, barring another supply shock which we can never be too certain these days. But keeping those two factors in mind, you probably have 10-year yields that are rangebound for the rest of the year. So our fixed income team doesn't see a whole lot of movement there. And I think that makes sense from the standpoint of where the economy is.

I talked about growth looking relatively solid. We're not necessarily in this GDP boom. And I think one way to think about that is even though it's being driven by all this business investment and especially within the AI space, you have to keep in mind that because you're going through this massive sort of boom in imports because a lot of that equipment is imported, imports are counted as a subtraction in the GDP data. So it's not a perfect one-to-one offset, but the more that these businesses import things for that AI spending cycle, the more the import actually goes up and that portion of GDP starts to subtract from growth. So I think that's one reason that the bond market has sort of been responding to this in a somewhat rational way, I think, because we're not necessarily going through this boom and inflation is still an issue.

So for the most part, yields have been rising when inflation becomes a problem and then vice versa. And in terms of the relation to the stock market, I think that means that yields will continue to be a key driver of the market's moves for the rest of the year. And you can kind of think about that in terms of the relationship and the correlation between those two being negative. So if you look at 10-year yields and you look at something like the S&P 500, we look at this sort of on a rolling 30-day or a rolling 60-day basis, but just think about it over the past few months. We've gone now into this territory where that relationship is negative.

So all else equal, every time you're getting a significant increase in Treasury yields, you're getting a down day for stocks and then vice versa. That is consistent with the market telling you that inflation is more of an issue and not growth. That's not an awful environment to be in, but it also means that on days when you get, let's say, a jobs report that looks inflationary, if that's putting upward pressure on bond yields, then you're probably getting a negative reaction in the stock market. So it's just a little bit different than what we had been used to certainly in the cycle leading up to the pandemic where every time yields were going up it was because the bond market was saying, hey, growth is looking good and looking solid, and then vice versa. That's not the case today. So I think that we'll remain in this sort of inflationary environment or at least an environment where the market is more focused on inflation than it is on growth.

Yeah, gold, it's so funny. Gold is this quite literally this shiny object that people always kind of gravitate towards when it's, rightly so, when it's moving in extreme ways. So earlier this year when it was having just some of those parabolic moves and every single news story on my Bloomberg terminal was related to gold. We were getting the question a lot actually, especially when everything was happening with Venezuela and when everything was potentially happening with Greenland, which I can't believe was still this year. But when all of that was going down, there were questions that we were getting from investors and from clients and sometimes from the media saying, how are markets not reacting to this? And they were mainly thinking about it in the context of the equity market. But our response would be, no, they are reacting to it. It's just happening in the precious metal space and that's where investors seem to be flocking to for safety and for a potential haven.

And I think that makes a lot of sense when you think about the reaction function for investors in this post-pandemic world. Other asset classes, not just stocks and bonds, have really been, they've sort of come alive again. Whether it's in the commodity space, whether it's in precious metals specifically, whether it's even in energy specifically, if you're kind of dissecting the commodity complex, those have kind of reawakened again. And I think that some of those trades within precious metals are sort of indicative of a lot of that geopolitical stress that people have felt, mostly because when you look at the equity markets fundamentals for this year, we came into the year with a relatively solid outlook for earnings estimates for the S&P. So it's not as if a lot of those geopolitical issues completely changed the profit outlook for the market.

So I think it makes a lot of sense as to why there wasn't a lot of selling pressure within US stocks as an example and why you saw a lot more upward pressure in something like metals. So whether that continues to be the case, I think unfortunately we'll only find that out if we get another kind of geopolitical supply shock. But I think that it's sort of indicative of where sentiment has sort of evolved in this cycle that's not only showing up in the stock market, it's showing up in these other areas like metals.

Well, I think that the volatility, I certainly think that the volatility backdrop has changed for the equity market. And I'll again preface this, similar to my comments about the bond market. I don't necessarily think this is an outright bad thing. I think this is just the different nature of markets that we kind of have to get used to. But the fact that a smaller share of companies in the S&P 500 or the NASDAQ, pick whatever large-cap index you want to pick, the fact that you do continue to see this concentration issue and it does get worse in the sense that a smaller share of companies constitute a larger share of the index's market cap, that just means that all else equal you are increasingly at the mercy of these names if you're an index-oriented investor.

So the 10 largest names in the S&P 500 accounting for 41, 42% of market cap, that means that close to a half of the move on any given day is going to be attributed to those names assuming they're moving in an extreme direction. And we've been having a sort of a clustering of these days which I just call opposite days where there could be one thing happening at the index level. So the S&P 500 could be up, but then when you look at the net number of members that are advancing, it could actually be negative. So you've got more stocks that are falling, but the index is doing better. That's really just the story of, okay, big tech or the big AI names are doing well. Vice versa.

And actually earlier this year when the index was kind of struggling and was sort of flat for the first month or so, we were actually relatively constructive on that because under the surface the average stock was doing pretty well. So you could think about it in terms of the equal-weighted S&P 500 was doing well. The cap-weighted S&P 500 was not because US tech was underperforming and it was sort of going through this de-risking phase. So I think that is becoming the new norm. Maybe it's kind of the ultimate duh statement, but this goes to, I think, for investors out there who again are index-oriented, I think it speaks to the idea and the power of knowing what you own.

If you're in something that is akin to a cap-weighted index like the S&P 500, you're going to be increasingly at the mercy of that small share of companies. So if the index is not doing well, but the average stock is, you can kind of see why because of those larger names. So I think it's not a reason to be outright bearish or outright bullish on those cap-weighted indexes. It's just to sort of think about how things have changed over the past several years. And it's been a phenomenon that's been happening, frankly, for the past decade. It started with FAANG and then it moved into MAG7. Now it's some form of the MAG10 or whatever you want to call it. But that, I think, in terms of your approach to markets as an investor, and especially a cap-weighted index, I think that's going to increasingly matter.

Yeah. So I mean, I think the somewhat obvious risk for the negotiations falling apart is if that happens and if you get a resumption of the conflict to some extent. You do run the risk of oil prices shooting higher again and then rates moving back up and that would be consistent, I think, with downward pressure on the equity market.

What's harder though, I think, to decipher in terms of the market's response to this is that there's another aspect at play or there's sort of another theme at play in terms of just massive volatility within the semiconductor space and at times within the software space. Both are sometimes at odds with each other. Those are the biggest components of US tech. US tech is the biggest sector in the S&P 500. So that's driving a good portion of the moves. So sometimes it's actually a little bit harder to sort of glean what the signal is coming from the market, especially as this is such a big IPO year and you do have some evidence of at least the retail cohort and the retail investor that has been sort of de-risking and maybe freeing up capital if they want to participate or not. We never know that for sure because it's not like they answer a question every time they sell and say this is exactly why I'm doing this. But that could be a factor in this backdrop.

So I think broadly, yeah, I think it would be a negative for the market if you do get sort of the can kicked down the road for this deal. But I think that taking a step back and looking at the fundamental picture, the profit outlook, as I mentioned earlier, has only gotten stronger this year. And if you look at earnings estimates for the S&P 500, they've gone up for every single quarter, and they've gone up pretty aggressively.

There is a good and a bad to that. I think the good is of course that companies have consistently beat estimates and have surprised analysts, surprising them to the upside not just at the profit level but also in terms of guidance. But the negative of that is of course you continually raise the bar. So the bar has now gotten very high for the rest of the year. So to the extent that you've got a company that maybe misses estimates a bit, and or for the hyperscalers if the capex budgets widen out even more and that spooks some investors in terms of not having as much free cash flow and sort of drying up that portion for that portion of companies, that I think brings you more to that corrective risk which we've had over the past couple of years.

Every now and then you go through an earnings season where the hyperscalers and the mega caps come out with these budgets and investors get nervous, it sends that group into a correction, causes a sort of a broader stumble for the market. But I think broadly from a profit standpoint as long as that's not affected, the corrections remain corrections, they don't turn into bear markets. So I think that's sort of an aspect to keep in mind especially because these days it feels that it's no longer earnings season, it feels like capex season because I think that's the number that most people are focused on for these companies. I'm not a believer in that. Of course I think we should always be looking at earnings especially for the rest of the market. But that has become a focal point for earnings season is specifically that capex data.

Yeah, this is another one where it's harder to do historical comps because at this moment we are seeing a really interesting spread between behavioral sentiment and attitudinal sentiment. So behavioral is what people are actually doing with their money, it's flows into ETFs or single stocks or options positioning, just broader equity positioning, all that stuff that we look at on a daily basis. But then you have the attitudinal side, which is survey-based. So it's asking people, are you bullish, are you bearish, how do you feel about the market? Are you anxious? It's the anecdotes I get when I go out on the road and speak with clients.

And the attitudinal side has actually been relatively bearish and relatively skeptical. So it's sort of at odds with all of the bullish and somewhat euphoric data points that are coming on the behavioral side, whether it's household exposure to stocks as a percentage of financial assets which is at an all-time high. If you looked at stocks as a percentage of household net worth, that's at an all-time high. We've crossed the Rubicon of stocks now having a larger share in net worth versus real estate in the US. You look at fund flows and they are incredibly strong, definitely skewed by the tech

sector. So all of that is still at odds with the attitudinal component that is still, you know, relatively skeptical. So it's typically not until you get both of those in the same camp, whether it's euphoric, whether it's, you know, depression, where you kind of sniff out some of these turning points in the market. So I think that you would need to see that attitudinal component catch back up, and for us to kind of get into that, you know, what we call that silly territory for the market to kind of start to look vulnerable. That doesn't mean that you can't have, you know, pullbacks along the way. You know, we've certainly experienced that, you know, earlier in June. But I think that in terms of a bigger kind of red flashing warning, you know, bear market warning, you would need to see that attitudinal component pick back up.