WEBVTT - March Mid-Cap Market Madness 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.720 --> 0:00:13.960 Week inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.840 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:26.160 and Tim Stenebeck from Bloomberg Radio. 0:00:28.000 --> 0:00:30.320 We've been batting around a lot today. The rally in 0:00:30.360 --> 0:00:33.239 stocks definitely taking a breather today, Tim, market, though I 0:00:33.280 --> 0:00:34.680 thankstill heading toward. 0:00:34.440 --> 0:00:36.000 Its best week in twenty twenty four. 0:00:36.440 --> 0:00:38.360 A lot of it has to do with speculation that 0:00:38.360 --> 0:00:41.559 the Fed ultimately could be moving to cut rates as 0:00:41.600 --> 0:00:44.320 early as June. So that's giving certainly a lift to 0:00:44.360 --> 0:00:45.120 the trade. 0:00:44.880 --> 0:00:48.839 All right, Drich, Yeah, Ryandytrike expected the US economy to 0:00:48.880 --> 0:00:51.520 avoid a recession last year. He also bet that inflation 0:00:51.560 --> 0:00:54.800 would cool sooner than the market was expecting. He added 0:00:54.920 --> 0:00:58.080 exposure to stocks during the banking turmoil last March and 0:00:58.160 --> 0:00:59.960 as the S and P five hundred sink in our 0:01:00.000 --> 0:01:03.520 October In hindsight, pretty good calls, and it's why Bloomberg 0:01:03.560 --> 0:01:06.399 included Ryan in a story about the stock optimists who 0:01:06.520 --> 0:01:09.080 nailed twenty twenty three, and that was back in December. 0:01:09.120 --> 0:01:11.479 You get to wear that mantle for a little while longer. Ryan, 0:01:12.000 --> 0:01:14.280 let's get to the interview with us. Is Ryan Dietrocky's 0:01:14.360 --> 0:01:16.520 chief market strategist at the Carson Group. He's back with 0:01:16.600 --> 0:01:19.840 us from Cincinnati. Good to have you back with us. 0:01:20.680 --> 0:01:22.800 We have had quite a run. This could be the 0:01:22.840 --> 0:01:26.080 best week that we've seen all year. Does it feel like, 0:01:26.240 --> 0:01:28.840 technically or even fundamentally in your view that we're getting 0:01:28.840 --> 0:01:30.800 a little frothy, that there's time that we need a 0:01:30.840 --> 0:01:32.920 little bit of a maybe correction or at least a 0:01:32.959 --> 0:01:33.880 little bit of a pullback. 0:01:34.800 --> 0:01:36.800 Yeah, Carol, Tim, thanks for having me back. And as 0:01:36.800 --> 0:01:39.400 someone whose mom passed away last year due to cancer, 0:01:39.440 --> 0:01:43.199 obviously thinking about Princess Kate and the whole Row family 0:01:43.200 --> 0:01:44.880 and all of our friends over in England and London 0:01:44.880 --> 0:01:47.000 there with the UK, I guess with everything that just 0:01:47.000 --> 0:01:48.240 came out in the last hour or so. 0:01:48.240 --> 0:01:48.880 Thank you for that. 0:01:49.000 --> 0:01:52.400 But get yeah, yes, be getting to the question. There 0:01:52.440 --> 0:01:54.520 no easy way to transform from what we just talked about, 0:01:54.560 --> 0:01:58.000 but let's just do it. Listen. Yes, we are looking 0:01:58.040 --> 0:02:01.000 at maybe a twenty seven percent round in twenty one 0:02:01.040 --> 0:02:03.480 weeks since that late October low. That's one of the 0:02:03.520 --> 0:02:08.080 greatest twenty one week rallies ever. Today could be fingers 0:02:08.080 --> 0:02:11.239 crossed the twenty first all time high already this year 0:02:11.280 --> 0:02:13.760 for the S and P five hundred. If you extrapa 0:02:13.840 --> 0:02:16.840 late that out, guys, that's like over ninety What does 0:02:16.880 --> 0:02:20.240 that mean? The previous record was seventy seven all time 0:02:20.280 --> 0:02:22.000 highs in ninety five, I meaning this could be one 0:02:22.040 --> 0:02:23.960 of the in theory, one of the best years we've 0:02:24.000 --> 0:02:27.240 ever seen. Yes, we think maybe we're due for a 0:02:27.280 --> 0:02:29.440 little pause. We've been overweight equities of come on with 0:02:29.480 --> 0:02:31.200 you for a while saying we're still bolish. We don't 0:02:31.200 --> 0:02:33.600 see a recession. We just have to be I guess 0:02:33.840 --> 0:02:36.760 be aware that what one final comment, what happened yesterday? 0:02:36.840 --> 0:02:38.799 One hundred and eighteen stocks and the sm P five 0:02:38.880 --> 0:02:41.760 hundred made a fifty two week high, the highest number 0:02:41.760 --> 0:02:45.280 we've seen in three years. Okay, that can be sometimes 0:02:45.360 --> 0:02:47.880 a near term kind of I don't say blowof tops 0:02:47.880 --> 0:02:50.440 the right word, but at least need for consolidation. But 0:02:50.760 --> 0:02:53.079 rarely with that many stocks making a fifty two week high, 0:02:53.120 --> 0:02:55.680 does that mean the ultimate peak? This happened, you know, 0:02:55.760 --> 0:02:57.800 like March and April of twenty one. Remember what happened 0:02:57.840 --> 0:02:59.919 the rest of twenty one pretty good year last I checked. 0:03:00.040 --> 0:03:01.720 So we're still bullish, but hey, maybe we're due for 0:03:01.720 --> 0:03:02.240 a little break. 0:03:02.320 --> 0:03:03.720 When you say a little break, a little bit of 0:03:03.760 --> 0:03:05.680 a pullback, or that we're due for. What are you 0:03:05.680 --> 0:03:08.000 talking about, Ryan, what would be within your model? 0:03:08.760 --> 0:03:08.959 Yeah? 0:03:09.000 --> 0:03:11.359 I mean, you know, well, between five to seven percent 0:03:11.360 --> 0:03:14.960 will be perfectly perfectly normal, nothing abnormal. I mean for 0:03:14.960 --> 0:03:17.160 the SMP's like we talked about up ten percent for 0:03:17.200 --> 0:03:19.200 the year, up you know, twenty seven percent the last 0:03:19.200 --> 0:03:22.760 twenty one weeks. And again, what's happened? It's so impressive. 0:03:22.800 --> 0:03:24.280 And you guys have talked a lot about this. If 0:03:24.280 --> 0:03:26.160 you told me Apple will be doing what it's been doing, 0:03:26.200 --> 0:03:29.200 Tesla's doing what it's doing. Oh, and we kick back 0:03:29.320 --> 0:03:31.160 the idea of when the rate cuts will be and 0:03:31.240 --> 0:03:33.160 how many there will be. But I just said, oh, 0:03:33.200 --> 0:03:34.920 you know what, market by being a little trouble, that's 0:03:34.960 --> 0:03:35.800 not what's happened. 0:03:35.880 --> 0:03:36.000 Right. 0:03:36.040 --> 0:03:39.680 What have we seen? Rotation? Rotation, rotation. You've got small 0:03:39.680 --> 0:03:42.200 caps and midcaps doing really well this week after the FED. 0:03:42.240 --> 0:03:44.560 But I'm more impressed, or we're more impressed with the 0:03:44.600 --> 0:03:49.680 industrial leadership, the cyclical leadership, your financials, your materials. The 0:03:49.720 --> 0:03:52.280 fact that those groups are doing well to us message 0:03:52.280 --> 0:03:55.840 of the market cyclical leadership says, hey, this is strong, 0:03:55.920 --> 0:03:57.320 and maybe we can just kind of have the baton 0:03:57.440 --> 0:03:59.960 passed around. And we're still those are groups we've liked, 0:04:00.040 --> 0:04:00.840 we still like them. 0:04:01.400 --> 0:04:04.640 Interesting, So, because I was just looking at some of 0:04:04.640 --> 0:04:07.320 the notes when we wrote the story. Bloomberg News put 0:04:07.360 --> 0:04:09.360 the story out back in December, you said small caps, 0:04:09.360 --> 0:04:11.720 in midcaps, and financials, those are three of your favorites. 0:04:11.960 --> 0:04:15.600 They continue to be three of your favorites. Recession that's 0:04:15.640 --> 0:04:18.200 not even in your playbook at all for twenty twenty four. 0:04:19.080 --> 0:04:21.560 Well it's not. It actually wasn't in our playbook last year. 0:04:21.600 --> 0:04:23.680 That wasn't pretty popular what we said that last year. 0:04:23.680 --> 0:04:25.800 But no, still we still don't see a recession. I mean, 0:04:26.000 --> 0:04:28.479 earnings this year expected to be up ten to eleven percent, 0:04:28.560 --> 0:04:31.320 and I know those are estimates that can potentially change, 0:04:31.400 --> 0:04:33.880 but the bottom line, the consumer's still strong. Look at 0:04:33.880 --> 0:04:36.560 those initial claims still around two hundred thousand. We know 0:04:36.680 --> 0:04:38.760 the big layoffs some of the big tech companies have had, 0:04:38.800 --> 0:04:41.400 but we're just not seeing that go into the consumer. 0:04:41.440 --> 0:04:45.120 I mean, consumer is still strong, still healthy, and final comment. 0:04:45.240 --> 0:04:47.920 You know, wages are like four to five percent this year, 0:04:47.960 --> 0:04:50.560 inflation's around three and a half percent. I mean, wager, 0:04:50.560 --> 0:04:52.800 you are still growing faster than inflation. That's normally a 0:04:52.800 --> 0:04:54.680 positive sign. And we still think the consumer is going 0:04:54.760 --> 0:04:56.640 to lead this economy the rest of this year, maybe 0:04:56.640 --> 0:04:57.080 even further. 0:04:57.160 --> 0:04:59.400 Hey, Ryan, we spoke to somebody yesterday. He's not necessarily 0:04:59.440 --> 0:05:01.359 on the same page. Look, this is what makes a market. 0:05:01.360 --> 0:05:03.320 But curious what you know, you'd say to her. Cheryl 0:05:03.320 --> 0:05:06.080 Smith over at Trillia Masset Management, she's an economist, she's 0:05:06.080 --> 0:05:08.520 a portfolio manager there. She thinks we're four to six 0:05:08.560 --> 0:05:11.080 months away from a recession. She's starting to see cracks 0:05:11.760 --> 0:05:15.240 or softness, she said, in many of the state unemployment figures, 0:05:15.440 --> 0:05:19.120 she's seeing credit card delinquencies going up. What say you 0:05:19.160 --> 0:05:20.000 of that data. 0:05:20.640 --> 0:05:23.040 Yeah, we are starting to see some of that. Those delinquencies. 0:05:23.080 --> 0:05:24.840 I can't disagree. I mean, it is what it is. 0:05:24.880 --> 0:05:27.200 But again, when you look at those is it more normalized. 0:05:27.279 --> 0:05:30.159 We had historically low delinquencies this time two years ago, 0:05:30.240 --> 0:05:32.279 right with all the government giving people money and different things. 0:05:32.400 --> 0:05:34.880 Now we think it's more normalizing right now. And in 0:05:34.920 --> 0:05:37.239 the other side to that. I mean, listen, the interest 0:05:37.279 --> 0:05:38.920 rates are higher, there's a lot of debt out there. 0:05:38.920 --> 0:05:41.400 People are paying a lot more interest on the debt 0:05:41.440 --> 0:05:44.040 that they have. People seem to forget though the other 0:05:44.279 --> 0:05:47.000 side of that, I mean six trillion dollars in money markets. 0:05:47.040 --> 0:05:48.440 I'm not so sure that's just going to lead money 0:05:48.440 --> 0:05:50.320 markets go to stocks will be very clear, but people 0:05:50.360 --> 0:05:52.800 are comfortable getting their four to five percent. If you 0:05:52.800 --> 0:05:54.920 look what's happened the last three years, the money people 0:05:54.960 --> 0:05:56.880 are paying on interest for debt over here is actually 0:05:56.960 --> 0:05:59.360 offset by what they're getting on interest in their money markets. 0:05:59.360 --> 0:06:01.520 People don't always talk about that, and again, I know 0:06:01.880 --> 0:06:04.160 a lot of people are struggling, but just the truth, 0:06:04.560 --> 0:06:07.400 net welts at all time high. Net welt's actually growing faster. 0:06:08.080 --> 0:06:10.120 You know, assets are growing faster than the liabilities. Look 0:06:10.120 --> 0:06:12.080 at the data from the FED. So it's not perfect, 0:06:12.160 --> 0:06:14.919 but again, I don't see a recession in six months. 0:06:14.960 --> 0:06:17.680 Put it that way, Hey, Ryan, what's stronger the technical 0:06:17.760 --> 0:06:20.640 story for stocks to continue to move higher or the 0:06:20.680 --> 0:06:23.280 fundamental story for stocks to head higher? 0:06:23.960 --> 0:06:24.159 Yeah? 0:06:24.400 --> 0:06:26.120 I think the technical I mean a great question. I 0:06:26.120 --> 0:06:27.680 mean we've got a little bit of both, but I 0:06:27.680 --> 0:06:29.200 think it is a technical I just talked about all 0:06:29.240 --> 0:06:30.840 those new highs that we just saw. You know, we 0:06:30.880 --> 0:06:33.120 had the fiftieth trading day of the year last week, 0:06:33.200 --> 0:06:35.240 we were up more than five percent. As of the 0:06:35.240 --> 0:06:37.400 fiftieth trading day, curl, I took a look, what happens. 0:06:37.400 --> 0:06:39.120 It's a good start to a year. Let's be clear, 0:06:39.279 --> 0:06:41.760 twenty five times we had the fiftieth day were up 0:06:41.800 --> 0:06:45.320 at least five percent. The rest of the year was higher. 0:06:45.440 --> 0:06:48.240 Ready for this twenty four out of twenty five times. 0:06:48.320 --> 0:06:50.480 I've grown with you guys a lot using stats like that, 0:06:50.520 --> 0:06:53.120 and I know they're just one stat don't invest blindly 0:06:53.120 --> 0:06:54.880 in anything in a one stat, but we've seen a 0:06:54.960 --> 0:06:57.279 lot of those. Factoring in the fact that what the 0:06:57.320 --> 0:06:59.640 Fed has said there's probably three cuts coming. The FED 0:06:59.760 --> 0:07:01.919 just up created their view on GDP. I mean, I 0:07:01.920 --> 0:07:04.320 hate to say it's like this perfect nirvana that we're 0:07:04.360 --> 0:07:06.440 living in right now, but it it really is. Things 0:07:06.480 --> 0:07:08.960 are a lot better. And maybe what worries me though, guys, 0:07:08.960 --> 0:07:11.400 and this logical question what worries me the most. I'm 0:07:11.400 --> 0:07:13.160 looking around a lot of people that were bearish last 0:07:13.200 --> 0:07:16.960 year now bollish. Well, that's optimistic right now, that kind 0:07:16.960 --> 0:07:19.000 of worries me a little bit, right, what Patten say 0:07:19.040 --> 0:07:21.840 everybody's thinking of like somebody isn't thinking. I mean, maybe 0:07:21.840 --> 0:07:23.800 that's where that little well does their break could be 0:07:23.840 --> 0:07:25.840 needed because as a lot of Johnny Com lately bulls 0:07:25.840 --> 0:07:27.480 that they were yelling at me a year ago. 0:07:27.440 --> 0:07:30.120 Bryan election year, that's one thing. 0:07:30.320 --> 0:07:33.360 And then okay, so now you said too that we're 0:07:33.440 --> 0:07:35.840 kind of expecting the Fed to make three rate cuts 0:07:36.120 --> 0:07:38.400 if they don't do that, and then let's throw on 0:07:38.520 --> 0:07:39.920 the election year on top of it. 0:07:40.200 --> 0:07:41.360 Those are two big things. 0:07:41.400 --> 0:07:44.240 Does that in any way kind of change or could 0:07:44.320 --> 0:07:47.040 change your outlook your optimistic outlook here? 0:07:47.640 --> 0:07:50.200 I mean it could change it a little bit. But honestly, 0:07:50.200 --> 0:07:51.800 you know what, we're looking for five or six cuts 0:07:51.840 --> 0:07:53.520 this time two months ago, and now we're looking at 0:07:53.560 --> 0:07:56.560 three cuts. Probably why because the economy has been stronger 0:07:56.560 --> 0:07:58.800 in twenty twenty two. The Fed was more hawkish, if 0:07:58.840 --> 0:08:02.000 you will, because now they're a little bit more hawkish 0:08:02.000 --> 0:08:03.960 than where they were two months ago because the economy 0:08:03.960 --> 0:08:07.040 is strong. So we like that real quickly. On the election, 0:08:07.480 --> 0:08:08.760 A lot a lot of people have talked about this, 0:08:08.800 --> 0:08:11.040 but in an election year when you have a president 0:08:11.160 --> 0:08:14.040 up for re election like we do the last ten times, 0:08:14.080 --> 0:08:16.760 going back to the fifties with Eisenhower, the SMP five 0:08:16.840 --> 0:08:18.680 hundred was higher every single time, ten out of ten 0:08:18.840 --> 0:08:20.960 twelve percent on average. It's almost where we are now. 0:08:21.040 --> 0:08:23.520 But just because it's an election year, don't get overly 0:08:23.680 --> 0:08:26.600 concerned or worried. History says election years do just fine, 0:08:26.680 --> 0:08:28.600 especially with an economy strong like this one. 0:08:28.680 --> 0:08:31.440 Hey, Ryan, what changes your mind? What turns you bearish? 0:08:31.520 --> 0:08:33.719 What data would you need to see over the next 0:08:33.800 --> 0:08:36.400 few months in order to change your Viewah? 0:08:36.559 --> 0:08:38.840 Yeah, great question there. So, as someone who looks at 0:08:38.840 --> 0:08:40.920 the market from a technical point of view, if we 0:08:41.000 --> 0:08:44.960 started to see leadership from areas like utilities, like staples, 0:08:45.800 --> 0:08:48.320 you know, a real estate, that would worry me that 0:08:48.600 --> 0:08:50.800 people forget this in late twenty twenty one, it is 0:08:50.840 --> 0:08:52.640 a great bowl market. Where was the leadership in the 0:08:52.679 --> 0:08:55.520 fourth quarter those more defensive areas And we all know 0:08:55.559 --> 0:08:58.120 what happened obviously in twenty twenty two, But fast forward 0:08:58.120 --> 0:09:00.320 to right now. We're seeing real to strength low thing 0:09:00.440 --> 0:09:02.720 utilities and staples, So I'm not seeing that yet. So 0:09:02.800 --> 0:09:05.040 that's the first kind of crack to me. If the 0:09:05.080 --> 0:09:06.960 defensive things start to lead we're not seeing it. We're 0:09:06.960 --> 0:09:09.480 seeing cyclicals lead. So that's still a reason to be bullish. 0:09:09.600 --> 0:09:11.880 Any new names for the upside or downside that it 0:09:11.880 --> 0:09:13.800 popped up on your radar, just got about forty five 0:09:13.840 --> 0:09:14.480 seconds left. 0:09:14.679 --> 0:09:16.880 Well, I know individual names. Well, we like midcaps a lot. 0:09:16.920 --> 0:09:19.080 I mean, midcaps are that area. Everyboney talks about small caps, 0:09:19.120 --> 0:09:21.320 large caps. I mean midcaps are about eight nine percent 0:09:21.320 --> 0:09:23.360 for the year. Nobody's talking about it, right, I mean, 0:09:23.520 --> 0:09:25.840 I think that's an area that quietly could do very 0:09:25.960 --> 0:09:28.320 very well this year. As everyone argues about, you know, 0:09:28.360 --> 0:09:30.480 the Red Sox or the Yankees or small caps or 0:09:30.679 --> 0:09:32.360 large caps. We like midcaps a lot. 0:09:32.400 --> 0:09:33.959 Carol, all right, kind of leave it on that note. 0:09:34.000 --> 0:09:36.480 I'm looking at the S and P five hundred MidCap 0:09:36.480 --> 0:09:38.880 four hundred index. It's up about seven point six percent 0:09:39.440 --> 0:09:41.760 so far here in twenty twenty four. Hey, Ryan, thank 0:09:41.800 --> 0:09:44.640 you so much, Really appreciate it. Ryan Dietrich joining US, 0:09:44.760 --> 0:09:47.040 Chief market strategist at the Carson Group, joining us once 0:09:47.040 --> 0:09:48.120 again from Cincinnati. 0:09:48.880 --> 0:09:52.439 You're listening to the Bloomberg Business Week podcast. Catch us 0:09:52.440 --> 0:09:55.679 live weekday afternoons from two to five pm Eastern. Listen 0:09:55.720 --> 0:09:57.880 on Apple car Play and ed Bright Auto with a 0:09:57.920 --> 0:10:02.080 Bloomberg business at or watch just Love I've on YouTube. 0:10:02.920 --> 0:10:04.720 It's hard to believe it's been a little more than 0:10:04.720 --> 0:10:06.480 a year since a key lender in the world of 0:10:06.520 --> 0:10:10.000 technology and startups came undone, collapsing and requiring the US 0:10:10.240 --> 0:10:13.920 federal government to step in. That failure the second largest 0:10:13.920 --> 0:10:16.400 in US history, in the largest since the Financial Crisis 0:10:16.400 --> 0:10:18.760 of two thousand and eight. It wasn't alone in terms 0:10:18.760 --> 0:10:21.920 of troubles in the regional banking sector. Signature Bank, First 0:10:21.960 --> 0:10:25.800 Republic and the group continues to be on everyone's radar. 0:10:25.880 --> 0:10:27.800 It does, indeed, and with one perspective and why we 0:10:27.800 --> 0:10:29.840 have heard a lot of senior execs in the banking 0:10:29.880 --> 0:10:33.360 sector talk about the value of being boring. Boring that 0:10:33.520 --> 0:10:36.320 is including our next guest with us now is none 0:10:36.320 --> 0:10:39.600 other than the chairman and CEO of PNC Financial Services, 0:10:39.600 --> 0:10:42.640 home to PNC Bank, Bill Demchek. He's joining us now 0:10:42.640 --> 0:10:43.440 from Pittsburgh. 0:10:43.559 --> 0:10:43.760 Bill. 0:10:43.800 --> 0:10:45.600 Great to have you here with us. And I got 0:10:45.600 --> 0:10:47.160 to ask, is that a Bloomberg behind you? 0:10:48.400 --> 0:10:52.040 Of course it's a Bloomberg, right, So nobody sent nobody 0:10:52.120 --> 0:10:52.920 send Bill, and I. 0:10:52.920 --> 0:10:58.960 Be right now. I am probably one of your earliest 0:10:59.000 --> 0:11:03.520 Bloomberg interesting way back to the early nineties on the 0:11:03.559 --> 0:11:04.400 trading flour. 0:11:04.440 --> 0:11:06.960 All right, there are some stories there not only about that, 0:11:07.240 --> 0:11:09.880 but also about what you have seen. 0:11:10.040 --> 0:11:11.120 Well, let's start there. 0:11:11.240 --> 0:11:15.360 I mean, I really appreciate someone who has been within 0:11:15.600 --> 0:11:18.680 the financial industry and then the banking industry for a while. 0:11:19.400 --> 0:11:21.960 You've seen a fair amount of cycles, You've seen crises. 0:11:23.200 --> 0:11:26.040 What's the best word to describe today's banking environment and 0:11:26.120 --> 0:11:29.360 kind of business and economic environment and they don't have 0:11:29.360 --> 0:11:30.080 to be the same word. 0:11:31.520 --> 0:11:35.880 Yeah, Look, I think banking is a little bit unique 0:11:35.920 --> 0:11:40.560 at the moment because we're in this uncertain period. You know, 0:11:40.600 --> 0:11:45.160 it's a function of pending regulation, you know, the impact 0:11:45.240 --> 0:11:47.920 of interest rates and when the fedscin ease or nineties, 0:11:47.920 --> 0:11:49.800 so it's a little bit different. I think the economy 0:11:51.360 --> 0:11:53.800 is kind of what you read about. It feels pretty healthy. 0:11:53.840 --> 0:11:57.760 It's slowing at the margin from a rapid labor's good, 0:11:59.160 --> 0:12:01.800 you know, And least inside of P and C. We're 0:12:01.880 --> 0:12:04.160 largely on the same page with Sir Paul on his 0:12:04.280 --> 0:12:05.319 recent comments. 0:12:05.640 --> 0:12:08.559 What can you tell us about your customers right now? 0:12:08.880 --> 0:12:11.040 And I asked, because we had a really interesting conversation 0:12:11.200 --> 0:12:13.920 with the President's CEO of Citizens Bank of Edmund. I 0:12:13.920 --> 0:12:17.840 mean this is a tiny bank in Oklahoma, one physical 0:12:17.880 --> 0:12:21.239 branch and they have an online business with a thousand customers, 0:12:21.240 --> 0:12:24.880 So I mean we're talking tiny. But Jill Castilla told 0:12:24.960 --> 0:12:28.360 us yesterday that she's never seen a better environment for 0:12:28.400 --> 0:12:31.559 her customers. Things are really really good right now. 0:12:33.640 --> 0:12:38.080 It's Jill's actually a good friend. It's she's not wrong, 0:12:39.480 --> 0:12:43.800 you know it. On the corporate side, there's areas of weakness, 0:12:43.800 --> 0:12:48.319 but there's a lot of areas of strength, particularly as 0:12:48.320 --> 0:12:51.600 we kind of lean into manufacturing and on shoring. Again. 0:12:52.720 --> 0:12:57.480 The consumer, yeah, varies by income level. We've obviously seen 0:12:57.840 --> 0:13:01.960 basic wages increase a lot, particularly at the lower level, 0:13:02.800 --> 0:13:05.520 but at the same time, we've seen the prices of 0:13:05.600 --> 0:13:11.720 their staple goods increase more compounded through time than and 0:13:11.760 --> 0:13:14.640 their wages have, even though in many instances wages of double. 0:13:15.960 --> 0:13:18.880 So you know, it varies well. 0:13:18.920 --> 0:13:20.679 And you know, we kicked off here, you know, Bill 0:13:20.760 --> 0:13:23.360 getting into you that one year essentially a little bit 0:13:23.400 --> 0:13:25.280 more than one year since Silicon Valley Bank and the 0:13:25.280 --> 0:13:25.959 collapse of it. 0:13:26.640 --> 0:13:28.400 Do you feel like we're out of that environment? 0:13:28.440 --> 0:13:30.559 And I think one thing we have learned is right 0:13:30.600 --> 0:13:34.000 that not every bank, not every regional, is the same 0:13:34.120 --> 0:13:35.560 and in terms of their exposure. 0:13:35.880 --> 0:13:37.320 But we're still kind of a little. 0:13:37.080 --> 0:13:39.600 Concerned about commercial real estate, not sure that we've gotten 0:13:39.640 --> 0:13:43.080 through that. So when it comes to concerns within some 0:13:43.160 --> 0:13:45.760 of the banking sector, do you think that we could 0:13:45.840 --> 0:13:49.040 see more troubles still depending on their exposures. 0:13:51.080 --> 0:13:54.240 At the margin, probably in smaller banks, most of which 0:13:54.280 --> 0:13:58.480 you will never have heard of. I think, first of all, 0:13:58.480 --> 0:14:01.360 as you know, I don't particularly like the term regional. 0:14:01.400 --> 0:14:04.319 It's not very descriptive of anything anymore, particularly in a 0:14:04.440 --> 0:14:07.880 digital age. But I'm not going to. 0:14:07.800 --> 0:14:10.720 Call you a super regional, which people call you sometimes. 0:14:11.200 --> 0:14:14.040 No, I don't know what we're national, but I know 0:14:14.160 --> 0:14:16.680 I know you are in that campaign in the second 0:14:16.720 --> 0:14:20.240 But you know, practically and you see the same numbers 0:14:20.280 --> 0:14:22.760 I do. Is banks get smaller, they tend to have 0:14:22.800 --> 0:14:26.920 a higher concentration of real estate. Their concentration of real 0:14:27.040 --> 0:14:32.000 estate tends to be more fixed rate, medium term in 0:14:32.160 --> 0:14:35.400 length and B and C properties, you know, so permanent 0:14:35.440 --> 0:14:38.440 financing on older B and C properties, which is kind 0:14:38.440 --> 0:14:40.480 of the area that's going to get hit the most 0:14:41.120 --> 0:14:45.640 in a higher rate environment with you know, increased office vacancies. 0:14:45.640 --> 0:14:49.000 But it's not a systemic issue, certainly for the for 0:14:49.080 --> 0:14:52.480 the banking industry, not for any of the names you 0:14:52.520 --> 0:14:56.040 will otherwise know, and we'll make our way through it. 0:14:56.480 --> 0:14:58.880 Well, let's talk more broadly, just about about real estate 0:14:58.880 --> 0:15:00.960 and talk to us a little bit about your own 0:15:01.000 --> 0:15:04.160 exposure to real estate and commercial real estate. How can 0:15:04.200 --> 0:15:05.280 you characterize that for us? 0:15:07.280 --> 0:15:10.520 You know, look, it's a small percentage of our total loans, 0:15:10.560 --> 0:15:13.360 that not a big percentage of our capital. We have, 0:15:16.280 --> 0:15:18.560 you know, plus or minus eight and a half billion, 0:15:18.600 --> 0:15:22.360 I guess in total what you would define his office. 0:15:22.480 --> 0:15:26.280 And that is where all the spotlight is starting to 0:15:26.280 --> 0:15:28.720 shine on multi family. But we're not seeing stress and 0:15:28.800 --> 0:15:32.880 multifamily at the moment, notwithstanding you know, news that you 0:15:33.040 --> 0:15:36.080 might see out of New York and affordable in other places. 0:15:36.320 --> 0:15:39.760 Generic multifamilies do and just fine. But inside of office, 0:15:40.080 --> 0:15:41.800 you know, say we have that eight and a half billion, 0:15:43.600 --> 0:15:46.760 there's there's about four and a half billion to five 0:15:46.800 --> 0:15:49.480 billion that is multi tenant, and that's where the problem is, 0:15:50.920 --> 0:15:54.240 and we expect problems there and we're reserved quite a 0:15:54.360 --> 0:15:57.400 high level against it as far as we've cycled through 0:15:58.280 --> 0:16:02.640 you know, these projects that go not performing. We've actually 0:16:02.840 --> 0:16:06.040 been conservative and what we've been reserving, so we feel 0:16:06.040 --> 0:16:11.600 okay about it. We're heavily reserved today. It's gonna be 0:16:11.640 --> 0:16:14.520 you know, most of our stuff comes due over the 0:16:14.520 --> 0:16:16.960 next year, so you know it's kind of project based. 0:16:16.960 --> 0:16:19.760 They come online, so we're gonna we're going to know 0:16:19.800 --> 0:16:21.680 the answer to this pretty quickly. 0:16:21.720 --> 0:16:23.200 I suspect interesting. 0:16:23.360 --> 0:16:27.600 Hey, listen, we also said that boring is something that 0:16:27.640 --> 0:16:29.760 you guys are tapping into. We've got a great chart 0:16:29.760 --> 0:16:31.480 that we can share with those who are watching right 0:16:31.480 --> 0:16:35.560 now that our producer Elizabeth is going to share out 0:16:35.560 --> 0:16:38.560 with everybody. But it talks about bank management, not just 0:16:38.680 --> 0:16:43.800 your own, but others using boring on calls this year, 0:16:44.360 --> 0:16:46.760 quarterly update calls and earnings calls. 0:16:46.840 --> 0:16:50.280 It is up a lot. Boring not a bad thing. 0:16:50.560 --> 0:16:52.760 And you guys have an advertising campaign that you are 0:16:53.000 --> 0:16:55.360 stressing that we do. 0:16:55.760 --> 0:16:58.760 I mean, I'll make a couple of points. I think 0:16:59.040 --> 0:17:01.200 if you look back and hit history, I've talked about 0:17:01.480 --> 0:17:03.720 our bank and banking in general is kind of three 0:17:03.800 --> 0:17:07.359 yards in a cloud of dust, and you grow, you know, 0:17:07.400 --> 0:17:09.919 with GDP and if and if you're good at it, 0:17:10.000 --> 0:17:14.480 you can outpace that but we are by our very 0:17:14.560 --> 0:17:17.360 nature as in industry, when you see outliers so that 0:17:17.400 --> 0:17:23.000 there tends to be something going on underneath that. And 0:17:23.000 --> 0:17:25.600 and and when we think about you know, we use 0:17:25.600 --> 0:17:29.359 the word boring. I don't necessarily like to think of 0:17:29.400 --> 0:17:34.000 myself as important person, but banking auto be I get it, 0:17:34.040 --> 0:17:37.680 but boring. You know, banking shouldn't be drama for our clients. 0:17:37.760 --> 0:17:41.800 It ought to be predictable, consistent, stuff works. They know 0:17:41.840 --> 0:17:44.040 their money's safe. They don't have to read about us 0:17:44.040 --> 0:17:47.840 in the headlines. That that's who we are. That's how 0:17:47.880 --> 0:17:50.840 we define ourselves. You know. We we to the core 0:17:50.880 --> 0:17:54.320 of this company, to the very best of our ability. 0:17:54.359 --> 0:17:57.000 We try to do right by all of our constituents 0:17:57.040 --> 0:17:59.080 every day, and when we screwed up, we fix it. 0:17:59.520 --> 0:18:01.760 We're gonna leave on that note, but I hope we 0:18:01.760 --> 0:18:04.560 can get you back here real soon. Bill Demchek, he's 0:18:04.600 --> 0:18:07.879 CEO at PNC Bank, joining us from Pittsburgh. You are 0:18:07.880 --> 0:18:09.639 listening and watching Bloomberg Business Week. 0:18:11.480 --> 0:18:15.359 You're listening to the Bloomberg Business Week podcast. Listen live 0:18:15.440 --> 0:18:18.239 each weekday starting at two pm Eastern on Apple car 0:18:18.359 --> 0:18:21.320 Play and Android Auto with the Bloomberg Business ad You 0:18:21.359 --> 0:18:24.639 can also listen live on Amazon Alexa from our flagship 0:18:24.680 --> 0:18:28.760 New York station, Just Say Alexa playing Bloomberg eleven thirty. 0:18:30.080 --> 0:18:33.760 Big Was it big week for IPOs? Reddit raised nearly 0:18:33.800 --> 0:18:36.119 seven hundred and fifty million dollars pricing shares at the 0:18:36.160 --> 0:18:38.640 top end of the range. Shares surged in their debut, 0:18:38.760 --> 0:18:41.359