President and CEO, Mr. Chang M. Liu, took part in the L.A. Times panel to discuss the economic forecast and business predictions for 2024. You may view the complete article here.
I think it’s all about paying attention to the data because that will continue to drive the markets. The Fed has shown its hand, noting there will potentially be three rate cuts this year, but we don’t know when. Clients must be prepared for the fact that rates could stay higher for a longer period but be ready to take advantage when they drop for things like capital investments. On the savings side, the minute the Fed takes action with a rate cut, there’s a high probability that savings rates will start to decrease, so those who are considering CDs would be well served to lock in a rate sooner rather than later.
Labor is still an issue in some segments, not as volatile as it was a few years ago, but it remains a hot topic, given unemployment is the lowest it’s been for a long time. Hence, business owners need to be cognizant of employees’ expectations with respect to hybrid and remote work arrangements. Shipping and logistics are areas to pay attention to, given the potential risk of wars that may affect shipping routes. Still, I hope business owners recall the lessons learned during the peak of COVID-19 to maintain inventory by diversifying or engaging multiple sources. Rates are still uncertain, so it would be wise to stay flexible and not to assume where they might go and then be surprised and end up creating your own challenges. And, of course, I can’t forget to mention politics, given that it’s a presidential election year.
I think the hybrid office movement will continue to impact white-collar jobs and corporations significantly. For the most part, business owners and managers want more collaboration and the ability to build rapport in person. Still, with unemployment being so low, employers really don’t have much leverage to mandate a five-day week in the office. Unfortunately, remote work can lead to a lack of engagement and low comradery, resulting in a higher rate of turnover— especially for the younger workforce since job tenure isn’t as important as it’s been for more experienced workers. The tables will turn eventually, but employees are often in the driver’s seat.
I don’t see many changes coming to the lending market this year, with the money supply remaining tight as the cost of funds for banks continues to be high and underwriting standards continuing to be conservative. With limited ability to price up, i.e., fewer competing loan offers, I think banks will focus on taking care of their existing and VIP clients, so there won’t be a lot of client movement. The reality is that bank analysts aren’t looking for growth but instead are focusing on credit quality, concerns, and operating margins.
Outside the office market, the commercial real estate sector will be relatively healthy this year, particularly if rates soften. Hospitality has rebounded since COVID-19 and will continue to do well. Retail is holding its own against the lingering threats of online shopping since plenty of services still draw out community members. Industrial, once the jewel of commercial real estate, is experiencing a bit of an oversupply, with some larger users giving back space. Multifamily housing is undersupplied, so there is an opportunity for growth, but if it’s all Class A, that leads to affordability challenges. The office market valuation is down 40 to 50% since COVID-19. Still, most landlords survived because their tenants continued to pay their leases. The reckoning will come when those leases expire, and tenants stop renewing or significantly reduce their footprint.
There is no substitute for reading a lot about finance and the economy, whether it’s the Fed’s meeting notes, the Wall Street Journal, or the LA Times business section. It’s also important to talk to peers within and outside your industry—just keep looking for ways to learn. All the data points are out there, and current events will tie to any business. Networking events shouldn’t be considered mundane; they may be just what you need to give you a different perspective. If you are knee-deep in your business and unaware of what’s happening around you, you will miss opportunities or risks that are coming around the corner.
This article does not constitute legal, accounting or other professional advice. Although the information contained herein is intended to be accurate, Cathay Bank does not assume liability for loss or damage due to reliance on such information.
