“The story here has actually been mid-caps as opposed to the large caps.” – 02:08
Chris Whalen, Chairman of Whalen Global Advisors, joins Remy Blaire at the New York Stock Exchange to discuss the current economic landscape and the banking sector.
As analysts express growing concerns about a slowing economy, the credit markets present a different narrative, showing no signs of an impending recession. Whalen notes that net credit losses in the U.S. banking industry have been declining since 2024, remaining stable despite multiple recession warnings over the past three years.
Whalen shares his insights on the banking sector, indicating that banks are currently underutilized and eager to increase lending. He highlights that deposits are growing at twice the rate of loans, leading to excess funds being funneled into securities. He raises concerns about the rapid growth of non-bank financial institutions, while reassuring listeners that the credit side of banks remains stable, with recent earnings reports reflecting a benign outlook.
The conversation shifts to the performance of the S&P 500, particularly within the financial services sector, where major banks have experienced significant year-to-date gains. Whalen emphasizes that American consumers now have a multitude of choices in consumer finance, thanks to the emergence of various platforms funded by private equity. He points out that mid-cap banks have outperformed larger institutions in the last quarter, with companies like SoFi and Lending Club making notable comebacks.
As the episode progresses, Remy and Whalen discuss the upcoming insights from Federal Reserve officials, including Jerome Powell. Whalen predicts a cautious approach to further rate cuts, emphasizing that the central bank is more focused on inflation than on the overall economy. He reassures listeners that the banking sector is not signaling a recession, as banks are not significantly increasing reserves for future losses.