FOMC Preview with Frank Sorrentino
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Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. We are all in on the Fed today, although it may not seem like it because of the conflict overseas. It's kind of amazing, right? 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 Fed. Or we would talk about the market kind of marking time because it's just waiting for that 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. It's apparent...

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 $14 billion. 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 furious. It's good to have you. Would you like to just take a long nap and wake up in, I don't know, 2026 or 2027? Tell us about your world right now and what you're seeing because you tended to be pretty optimistic. It's interesting.

Yeah, it's interesting. You know, if you go back a couple of months to 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 vast majority of 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 businesses.

all types of construction, warehousing, even office, which has, as you know, been the subject of a lot of conversation over the last two or three years or so, is seeing a tremendous rebound as we're moving through this period of time. I'm getting a few questions from a 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 tariff talk 60 days or so ago, and a lot of investors were very concerned about how tariffs may impact bank earnings, you know, through the credit cycle, through any sort of credit cycle. That's really quite diminished these, you know, recently in the past few days or weeks.

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 where banks are feeling that there are particular segments of the market that are showing more signs of weakness than normal. Why is that?

Not to be negative, but I'm just curious. Why do you think things are holding up? I always start with we have a 4% 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 raises. There's 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 trying

driving our economy to all time highs. The market is reacting to that. You can't buy a car. 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 at 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 Telsey, and we talked about everyone trading down. So you're seeing discount retail doing better than most. Yeah.

pulling guidance, 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 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, yeah, we're a little nervous and these tariffs are more onerous? I think we are. Yeah. Yeah. I think we are seeing consumers being...

a bit more price sensitive. And I think they are 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 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 building supplies and building goods.

people front loaded buying things in 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 some of the

gas and tariff 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 the consumer spending was down a bit, it's down less than 1% or point something percent. So it's not a sea change that's going on. There is some volatility here, but overall I still see,

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 17th, the day before we hear from Fed Chair Jay Powell. We don't know what he's going to say. I think I know what he's going to say to some when he answers some questions specifically about politics in his own future, because he said those same answers for months.

But, Frank, I'm curious what you see 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 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

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 earnings 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 where they will be in quite a range. 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 the earning season, I don't remember people doing that. I've seen people pulling guidance from,

a lot, but not giving scenarios. Do you, how many, I'm curious about the conversations 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, 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 view we may have

So we're still hearing that folks in general are in good shape. There's a fair amount of liquidity still in folks' checking accounts and their ability to borrow still remains strong. And so we continue to see a fair amount

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 uses and he's used over and over again in interviews with us. You've been consistent. 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. Right. 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 who are talking to me about tariffs and tariffs don't actually impact their business. So I'm saying, well, okay, why are we focused on that?

So uncertainty absolutely can change the direction of the economy. Yep, 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 and CEO at the publicly held New Jersey-based community bank ConnectOneBank Corp. As we said, I'd like to remind you, it is a parent company of ConnectOneBank Corp.

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Visit gsk.com to discover more. This is an iHeart Podcast.