Video
First-quarter 2023 economic update: Breaking banks
Commercial and industrial loans in the US have been on the rise since September 2021.
Solloway Q1 2023 economic update: Breaking banks
Jim Solloway, SEI Chief Market Strategist and Senior Portfolio Manager discusses the economic outlook for the coming months.
Vivian:
Hello, I'm Vivian Estadt, Client Service Director at SEI.
I'm here with Chief Market Strategist and Senior Portfolio Manager Jim Solloway to provide a quick preview of one of the timely topics he covers in our most recent economic outlook.
Jim, the first quarter of 2023 brought an unexpected turn of events when several high profile US banks collapsed and Switzerland's Credit Suisse was taken over by UBS. Markets are now much more concerned that a recession is imminent if the problems in the US and European banking systems lead to a contraction in lending. What's your perspective on that?
Jim:
Thanks, Vivian. There's no doubt that the market turmoil and the stress felt by the financial services sector has resurfaced painful memories of the Global Financial Crisis of 2008. Certainly there are expectations that bank loan standards will likely tighten in the aftermath of the current crisis.
Commercial and industrial loans in the US have been on the rise since September 2021. The year-over-year gain through February totals more than twice the inflation rate.
However, it's worth noting that during the Global Financial Crisis, business loans outstanding didn't decline until October 2008. That's well after the recession's official beginning 10 months earlier.
Vivian:
Markets seem to be anticipating near-term interest rate cuts in conjunction with a recession. Are you saying it's too soon?
Jim:
Recent events have certainly raised the odds that a recession may begin later this year or in early 2024, but we think global financial markets are probably getting ahead of themselves. We don't see a near-term rate cut on the Fed's agenda.
Vivian:
Thanks, Jim. We always appreciate your insights.
As your OCIO, SEI is focused on the major issues that are of interest to our clients. We incorporate these discussions into our advisory process as the impact varies based on each client's goals.
For more of SEI's insights, read our latest economic outlook available on our website.
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