Markets with Megan

Ready to uncover some startling revelations about the U.S. economy? Join us as we welcome Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, in a riveting discussion about the Federal Reserve Senior Loan Officer Survey. Megan points to some concerning data, like the increasing number of banks tightening their lending standards for both large companies and small businesses since the pandemic began. She reveals that the current lending conditions are now worrisomely similar to those of the Great Recession.

But that's not all. In this deep dive, Megan also highlights the decline in demand for commercial and industrial loans, painting a somewhat grim outlook for the future. She emphasizes that these tight lending conditions do not immediately impact the economy, but rather have a delayed effect. So, as we brace ourselves for what might lie ahead in the second half of the year, this episode is a must-listen for anyone interested in understanding the potential economic challenges that may arise due to these shifting lending trends. So, don't miss out on this enlightening discussion with Megan Horneman.

Hello, welcome to Markets with Megan. This is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. We're coming to you today to talk about the Federal Reserve Senior Loan Officer Survey. It doesn't get much attention from a headline perspective, but this is one of the reports that's released quarterly that we pay a lot of attention to, because what it is is a survey of the biggest banks in the US and how they are giving out loans. Are they tightening lending conditions? This is something we've talked about.

A lot has been a result of the small and mid-sized banking crisis in the beginning of the year that we've seen a lot of banks pull back on lending. I just want to give some of the results from this survey. Today, 50% of the banks are tightening standards for large companies. It's the worst since the pandemic. The number of banks that are tightening standards for small businesses is about 50% the worst since the pandemic. The only other time it was worse than this was the Great Recession. We've actually even surpassed the dot-com bubble.

When you look at those banks that are increasing the loan rates over the bank's cost of funds, this has now surpassed the pandemic and it's the worst since the Great Recession. If you look at those banks that are reporting stronger demand for things like commercial and industrial loans. This is the worst since the Great Recession, so, surpassing the pandemic, there is not a good piece of news that I see in this article. I think it's worth noting that tight lending conditions act with a lag on the economy, so it's just another thing that keep us concerned about the economic outlook in the second half of this year. That's all I have today. If you have any questions or comments, please feel free to reach out to podcasts at verdence. com. Thank you.