Bloomberg Audio Studios, Podcasts, radio news. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenoveek on Bloomberg Radio. We are all in on the FED today, although it may not seem like it because of the conflict overseas.
Kind of amazing right now.
Any other day, Yeah, Yeah, where we'd be on the Tuesday, the first day of a two day policy meeting, we'd spend quite a bit of time talking about the food or were we.
Talk about the market? Kind of marking time because it's just waiting FED decision. But that's not necessarily been the trade today.
One person we go to regularly for his view on the economy and rates around FED decisions is Frank Sorrentino. He's chairman and CEO at the publicly held New Jersey based community bank connect One Bank Corp. W's the parent of Connect One Bank. We're talking small businesses, construction companies among its customers. The bank recently merged with First Long Island Corp. Which brings its total assets, Carol to about fourteen billion dollars.
All right, Frank is back with us and he is in Melville, Long Island. Frank good to have you here. We always appreciate getting some time to check in with you and see what you are seeing. It's all fast and very Carolyn. It's good to have you. Would you like to, like just take a long nap and wake up and I don't know, twenty twenty six or twenty twenty seven, tell us about your world right now and what you're seeing, because you you tended to be pretty optimistic.
Yeah, it's interesting. You know, if you go back a couple of months the Liberation Day and you took a nap on that day and woke up today, you'd say, well, I don't know, things don't look too bad. Other than what's going on overseas, the market is pretty much rebounded or recovered most of the ground. You know, people feel the economy is on more sturdy ground today than they thought in those weeks after, you know, after that news. But the economy still is quite robust in the markets
that we serve, as you know. Connect one is in the New York metro market in New Jersey, New York now Long Island in a pretty big way, and the majority over the client base that we have is still seeing strong demand for products and services. A lot of
service oriented businesses. There's still an enormous amount of demand for housing, for apartments, for all types of construction, warehousing, even office which has, as you know, been you know, the subject of you know, a lot of conversation over the last two or three years or so, has is seeing a tremendous rebound as we're moving, you know, through this period of time.
I'm getting to a few questions from loyal listener Ryan Horan reaching out over the instant Bloomberg. He's glad we're talking to you because a great check of small business and the consumer. He's curious about any worrying trends or any pullback in underwriting that you're seeing. Are you adding to reserves to shield any non performing loans?
You know, most banks are reporting that they're seeing a fairly benign credit perspective out there. I know there was a lot of terror of talk UH sixty days or so ago, and a lot of investors were very concerned about how tariffs may impact bank earnings, you know, through the through the credit cycle, through any sort of credit cycle that's really quite diminished these you know, recently in the in the past few days or weeks, UH and
banks are still reporting a fairly benign credit period. There are certainly one offs, as we would always expect there to be, and there's appropriate reserving going on at most banks, but there's nothing systematic that's out there that were where banks are feeling that there are particular segments of the market that are showing more signs of weakness than than normal.
Why is that.
Negative? When we start, I always start with we have a four percent unemployment rate. Everyone has a job and anyone who's looking for a job can get a job, and so things are good. People are getting raised, there's, you know, plenty of opportunity in the market. There's been an enormous amount of liquidity put in the market over the last dozen years or so. That is just driving our economy to all time highs. The market is reacting to that. You can't buy a car, you get people
are waiting in line for homes and apartments. Luxury goods are on fire. You go to the airport, you can't get on a plane. It's the economy. I keep saying the economy is robust, and everyone keeps challenging me why I use that word. Well, it just is. And so all of these things are driving GDP is growing it
over three three and a half percent. That's what's driving what's going on, notwithstanding all the news that you're hearing about, you know a lot of global issues and other you know political you know craziness that's going on in the marketplace.
But what do you make you know, we talked the retail sector earlier with Dana Tel and we talked about everyone trading down. So you're seeing discount retail doing better than most airlines pulling guidance it. It feels like there's stuff brewing. And I think it's safe to say that employers are really gun shy about letting go of workers. There is some labor hoarding going on because they remember all too well, Frank, what happened after COVID and nobody
could find workers, right. So I just you know, I just wonder if you've seen a lot of economies. I know I ask you this all the time, but I just do wonder. Are you hearing anything anecdotally where people are like, we're a little nervous, and you know these tariffs are yeah.
Yeah, I think we are seeing consumers being a bit more price sensitive, and I think they are, you know, maybe not spending as lavishly as they might have in the past, and they got a little shook up with the tariffs, and they're looking at some specific products that you know, may have changed in price. There's been some hoarding going on that I do think impacted some of that consumer spending. I know for a fact that's impacted
you know, building supplies and building goods. You know, people front loaded buying things and anticipation of the tariffs, so there's a lot of turbulence going on in the marketplace today. My read, however, is though if you strip out you know, some of the you know, gas and teraf related items out of the consumer spending, you'll actually see numbers were
actually up a bit, not down. And even what they're reporting that that you know, the consumer spending was down a bit, it's down less than one percent or something percent, So it's not a it's not a seat change that's going on. There is you know, some volatility here, but overall, I still see I don't I do not see a recession, and I still see a fairly robust economy ahead.
You know, we're talking to you on Tuesday, June seventeenth, the day before we hear from FED chair J. Powell. We don't know what he's going to say. I think I know what he's going to say to some question when he answered some questions specifically about politics and his own future, because he said those same answers for months. But Frank, I'm curious what you see of the as the path of the Federal reserve for the remainder of the year. Give us your dot plot.
Well, based on what I just said to you. If that, if that in fact is what's going on in the economy, then the expectation has to be that the Fed does not lower rates because the economy is still quite strong, and so my belief would be that you'll see a You will definitely see some commentary about the uncertainty that
lies in the marketplace as we move forward. There are lots of things to be uncertain about, you know, tariffs being won, the war in the Middle East, the war in Ukraine, and how those things are impacting you know, gasoline prices, which happen to be down, but you know
could rise dramatically depending on where things go. So there's going to be a lot of things that are inputs that the FED will be looking at that will determine what's going to happen in the future, and they may give some guidance about what they think those things would be going forward. The market expects the FED to cut at least one, if not two, times this year. I believe it'll be closer to one. And be careful what
you wish for. I do believe that again, this economy will continue to roll on and the FED is going to have a tough time to lower interest rates as we move through this cycle.
Frank, I do wonder too. You know, this was an interesting past earning cycle where we actually did have folks give you two scenarios like, if everything's good, here's what our numbers will be. If they're not, here's you know where they will be, and quite arrange. And I'm not saying everybody did that, but it was just for those of us who have covered publicly held companies for a long time and earn the earning season. I don't remember people doing that. I've seen people pulling guidance a lot,
but not giving scenarios. Do how many I'm curious about the conversation do you have with your team. Do you talk about a lot of different scenarios in this environment, because it could go a lot of different ways, or no, you feel much more confident to say this is probably the course, and here's why we can make decisions based on this course.
We definitely have those discussions. We're definitely keeping our ear close to what's happening. And the thing that I constantly bring back to the table is, let's listen to what our clients are telling us. And so, you know, it's one thing for us to predict what we think is going to happen based on facts, figures, whatever, but hearing in from our clients and what they're experiencing in each of the various segments that we do business with, to me, is much more important than any few we may have
on our own. So we're still hearing that folks in general are in good shape. There's a fair amount of liquidity still in you know, folks checking accounts and their ability to borrow still remains strong. And so we continue to see a fairly robust economy going forward. And that's what we're modeling for and that's what we're predicting for the future.
Some people say uncertainty. Frank's word is robust. That's the word he is over and over again.
You're existent you've been consistent.
And uncertainty is is a challenge though, and it is impacting you know, people's decision making ability. And so you know, one of the things that I always look at and always counsel people is, hey, look at what's really going on on the ground, and you know, try not to get caught up in all the headlines of you know, what may be going on around you that don't that
doesn't necessarily impact you. I've had conversations with clients we're talking to me about tariffs, and tariffs don't actually impact their business, right, So right, I'm saying, well, okay, why are we focused on that? So uncertainty absolutely can change the direction of the economy.
Yep, sentiment can be pretty strong, right, and uncertainty certainly plays into something like that. Hey, Frank, as always, thank you, Thank you. Frank Sorrentino, chairman CEO at the publicly held In Jersey based community bank connect One Bank, or as we said, and like to remind you it is a parent company of connect One Bank.