UBS On-Air: Market Moves Talking Markets Podcast with Steve Chiavarone of Federated Hermes
Jan 18, 2026
Steve Chiavarone, Deputy Chief Investment Officer for Equities at Federated Hermes, shares insights from his 20 years of investment experience. He discusses the strong U.S. economy, highlighting recent GDP figures and steady unemployment. Chiavarone provides an optimistic look at Q4 earnings, particularly JP Morgan's results, and argues that current equity valuations make sense due to rising profit margins. He also explores the impact of AI on various sectors and outlines a cautious forecast for Fed rate cuts by 2026, while warning of potential market risks.
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Episode notes
Economy Exited 2025 Stronger Than Expected
- The U.S. economy exited 2025 stronger than feared and looks set to reaccelerate into 2026.
- Earnings have surprised higher and could continue to drive upside surprises in the first half of the year.
Adjust Valuation For Profitability And Composition
- Don't judge market valuation by a single long-term average multiple; adjust for changing profitability and sector composition.
- Use higher multiples for MAG7 and slightly higher turns for the rest of the market to assess fair value.
AI Spending Is Spilling Into Old Economy Sectors
- AI capex is shifting beyond chips to memory, construction, materials and broader old-economy beneficiaries.
- Large, rising CapEx forecasts imply a cyclical tilt and opportunity in materials and construction-related sectors.