Writer: Joshua Andino
2 min read February 2023– Perspective and intent are central to navigating today’s unorthodox environment, agreed panelists Albert Fox, George Destafney and Gregory Carlisle at the recent Invest: South Jersey 2022-2023 leadership summit. The second panel, ‘Money on the Move: A look at what investors need to do in an evolving economic landscape and how banks and financial institutions can help,’ covered the current business climate, preparing for economic headwinds and more.
“It’s important to take a step back and understand that a lot of the landscape has changed, but a lot of the landscape has given more choices and more tools. We have to be very purposeful and deliberate to evaluate what those tools mean, how they get used, what’s worked well and do more of it, and what hasn’t worked well and either make it better or move along past it. I think that’s probably the main issue, economically and in the business climate. It’d be worthwhile for everybody to take a pause and think about that for a second. It’s a big pendulum. Ten years worth of progress in two years is a lot to digest,” said Fox, who serves as managing director and wealth management financial advisor for Fox, Penberthy and Dehn at Morgan Stanley.
Company balance sheets, household income and low unemployment are all strong, and would likely blunt the adverse impacts of any potential recession, while wage inflation would likely persist for the foreseeable future panelists discussed. The amount of stimulus provided throughout the pandemic meant that macroeconomic actors — particularly the Federal Reserve, have an interest in slowing down the economy to help combat inflation.
Carlisle, TD Bank’s senior vice president for Southern New Jersey and coastal market president, added, “The market became very flooded with cash like we’ve never seen before. Ironically during the pandemic shutdown, it allowed businesses to expand and take on more, likely beyond what you even realize, at a pace we couldn’t predict or perceive. But you fast forward into today and there are many deliberate measures in place to slow the economy — the Fed just raised rates again, that came quickly. Rising rates, little to no more government money, emergency loans that are now in repayment mode — it’s causing a strain on some businesses.”
Carlisle added his preferred indicator was the housing market — as long as it remained strong, or at least stable, the economy would persist in its current stubborn growth trajectory, despite the best intentions of actors such as the Federal Reserve. According to the most recent data from real estate firm Redfin, New Jersey remains a seller’s market, and while houses have increased their days on the market and the total number of homes sold has declined, prices have remained high, increasing 2.3% year-over-year and currently hovering at $427,300.
The Fed has consistently raised interest rates in an effort to tame inflation, with the most recent FOMC press release stating in no uncertain terms, “Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation has eased somewhat but remains elevated,” leading the central bank to raise rates by another 0.25 basis points and pegging the Federal Funds rate to 4.50 to 4.75 percent. “Our view is this process is going to be longer than people expect, there’s going to be some permanency to it, and there’s some things the Federal Reserve can’t influence,” added Fox in reference to extraneous factors like the ongoing war in Ukraine.
George Destafney, OceanFirst Bank’s New Jersey Region president, underscored the difficulty this would pose to families and individuals moving forward. “Inflation has some pretty destructive power to it.” He noted that over 1.7% of families making over $100,000 reported expenses greater than total income, with the rate rising to about 7% for families making around $50,000 a year. Today’s environment is hallmarked by contrasting indicators, Destafney added, saying, “Home prices were up 6% in the fourth quarter of last year. That’s saying these weird anomalies are holding, where interest rates are higher, home prices are holding, there’s no inventory on the market, and people that have homes aren’t inclined to sell them due to where rates are now.”
Regarding the future, the panelists agreed that it was wiser to avoid making any predictions. “Forecasts are just that — predictions. After 30 years of doing what I’m doing, there are no special places to hide, no secret tricks, there are no gimmicks. You have to have a long-term, disciplined plan, and execute on that… There are no easy ways to do it.” While circumstances may be different, the patterns are the same, concluded Fox.
“If your banker can’t talk to you about the movement of money in and out of your business, what potential money you could make, invest and build from an equity standpoint, you don’t have a good commercial banker… Much like you would talk to your CPA quarterly, make sure you talk to your banker at least quarterly to check on the health of your business,“ advised Carlisle, wrapping up the panel’s discussion to a room full of applause for the robust discussion.
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