Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Gary Siegel (00:09):
Hi, and welcome to another Bond Buyer Leaders Forum Event. I'm your host Bond Buyer, managing editor Gary Siegel. My guest is Scott Colbert, executive Vice President and Chief economist at Commerce Trust Company. Today we're going to discuss Scott's outlook for 2024, including monetary policy. Unfortunately, Scott is having technical issues and will not be joining us with video just by audio. Scott, welcome and thank you for joining us.
Scott Colbert (00:44):
Sorry about the video. This is what comes with working at a bank and a firewall, I guess.
Gary Siegel (00:51):
So the Federal Reserve released minutes from the Federal Open Market Committee's December meeting this week, and there were no clues about rate cuts, which is what the Fed and the markets expect will happen in 2024. This morning, the non-farm payrolls report showed 216,000 jobs were added and higher than expected wage increases. How do these latest reports factor into your outlook for 2024?
Scott Colbert (01:25):
Well, if we go back an entire year, I'll raise my hand and say I was one of the economists that would've thought we likely would've been approaching a recession right now. Historically, the inverted curve, the collapse of the leading economic indicators, cooling nominal growth and still high inflation but coming down, might've gotten us to a point where basically there was very, very modest or literally no growth, but it hasn't worked out that way. Clearly, job growth has been stronger and inflation has rolled over quicker than I might've expected, and we still have an inverted yield curve. We still have a falling leading economic indicators, but it's just another print, another job print that suggests the recovery is still firmly entrenched and making positive direction. We've never had a recession where you didn't also have job losses. And I always like to say to my clients that, look, if you promise me collectively you'll create just a few jobs next year, we're not going to have a recession. And so clearly if there is a recession, it's grossly out on the horizon. And I think this also dampens the market's of course, expectation for a Fed pivot or at least an assertive and aggressive Fed pivot, at least as much as the market was hoping for.
Gary Siegel (02:45):
So what is your view of what the Fed will do this year?
Scott Colbert (02:50):
Well, first off, I think we ought to take them at their word. The market didn't take the Fed at its word when it said it was going to raise rates and it was going to focus on inflation, it was going to risk a recession. The market's expectations were always lower than where the Fed ended up raising rates. And now I think the market, again, is ahead of the Fed pivot, if you will. The Fed itself has told us on a mean forecast that they might be lowering rates as early as March, but I do think collectively the group was going to say, listen, while we see the whites of the eyes of a potential 2% inflation rate ahead of us, we aren't there yet. And the cardinal sin of a central banker is to have to reverse direction. Once they begin to reduce rates, they don't want to have to say, oh my gosh, turn around, and start to push them up. So I still think their tendency, given the fact that the economy is moving along just fine and is seemingly able to adapt to these higher rates, is to sit tighter a little bit longer than perhaps even those FOMC members thought when they produced their projections. In December,
Gary Siegel (03:56):
Chair Powell said earlier that the biggest mistake that was made in the seventies was that they thought they had accomplished the job too soon and that he wasn't going to make that mistake.
Scott Colbert (04:10):
Yeah, he said that, but then of course he's also kind of led the charge at post the FOMC meeting to provide more ammunition for the potential pivot. I think unfortunately, I think they got a little bit carried away with a soft landing. I think the average Fed economist and the average FOMC member didn't really think they could pull off a soft landing, were really willing to risk a hard landing. Now, it's not like they want to be heroes, but they sure would like to pull off the soft landing. And as inflation has come down faster than they originally thought, I think they would like to try and accomplish both objectives, which of course is full employment and low inflation, but I still think they're going to be cautious about it and maybe a little more cautious than the mean FOMC dot plotter has suggested.
Gary Siegel (05:08):
A lot of economists have suggested that although inflation has come down, getting it lower from here is going to be more difficult because of some stickiness in the items that are propping it up now.
Scott Colbert (05:28):
Well, if you dissect the inflation into two components goods and non-goods, it's the goods that of course have come down to zero. Now, amazingly enough, and we don't talk about this enough, and of course many people would even disagree with this number, but the inflation for goods from 2000 except for the pandemic, was essentially zero. Effectively, while costs might've gone up, they improved the products enough. So that adjusted for the improvement in there's been no goods inflation literally year by year by year, let's call it the China effect, the amazing China effect that we've had keeping prices low. But the other 70% of it that's service oriented clearly has more to do in general with labor and labor costs. We know that per the Atlanta Fed wage tracker, we still have kind of five-ish percent salary increases, but declining, no doubt declining towards cooling towards four.
(06:25)
But it does say that there's still a marked part of the CPI and the PCE for that matter, of course, that is wage dependent, given some modest productivity, it could be tough to get to the last mile, but we've all been surprised that this has approached a little bit quicker. And then a big part of this holding this up, of course, is the housing component. And while housing prices are somewhat surprisingly up last year, the OER (owner's equivalent rent) still is in a clear downtrend and I think will also help pull those inflation statistics lower. So let's face it, the CPI is still being held up by a owner's equivalent rent. It's coming in just less than 7%. That's a significant part of the CPI, and it's an even bigger part of the core CPI. Just so you know, it's only about 55 or 60% though weighted in the PCE. So in other words, it's not nearly as big a component in the PCE, but I also think that's pulling inflation down too. So I'm not terribly worried that the service side won't continue to cooperate and at least move moderately lower as the year progresses.
Gary Siegel (07:41):
So you had said that you expected we'd be in recession by now and obviously
Scott Colbert (07:47):
Go back exactly one year, Gary, when we did this, I told you we'd be in a recession January 2nd
Gary Siegel (07:53):
You're not the only one who told me that,
Scott Colbert (07:57):
Right? I was somewhat facetious in that. But basically on average, per my historical models, that would've been the time the recession was coming based upon historical averages January 2nd, and I even said, why not call it one 30 in the afternoon?
Gary Siegel (08:14):
So why has the economy been so resilient and we haven't fallen into recession?
Scott Colbert (08:22):
I think with hindsight now we all have a thought on why this probably occurred. I think I have five key reasons, but simply put from a top-down perspective, the reason that didn't occur was that inflation rolled over a lot faster than nominal growth, right? The difference between nominal GDP and the GDP Deflator is real growth. And of course real growth this past year is going to come in closer to north of 2.5%, which is about 1.5% more than I thought it was going to be because nominal growth still came in at 6%. Basically, once you get the fourth quarter statistics in, I think we'll see nominal growth at about six and the GDP deflator closer to three. So that's the big reason. But what was it that caused nominal growth to stay up without addressing really the disinflationary part of it? I think number one is demographics.
(09:19)
Number one is demographics. We just don't need to create very many jobs to keep everyone fully employed. The new entrant into the workforce, the net new entrants coming into the workforce are very modest. And the reason for that, of course, is that the Boomers are still leaving, immigration's picking up just a touch, but we also know how many 18 year olds we're producing and how many 22 year olds we're producing and pushing out into the workforce. And it probably only takes about 40 to 70,000 jobs created to basically fully satiate those new entrants. So you can't have a recession until you create unemployment. That's the Sahm rule that everyone's been focused on, right? You need to have the rising unemployment and then of course you basically need just no job growth at all, but the demographics are one, but pandemic stimulus certainly has to do something with it as well.
(10:10)
There's a massive amount of stimulus and it continued along in the CHIPs Act and the IRA Act, and it continued with deficit spending last year that accelerated. I want us to spend some time talking about deficit spending because a good part of this story is the government's willingness to borrow forward growth via deficit spending. I think the fixed-term lending, we don't emphasize enough, but basically, alright, so higher interest rates are supposed to slow the economy, which they did, look, nominal growth on a year-over-year basis peaked at 16.9% and it's all the way down now to probably something approaching six. So we have lost 10% of peak nominal growth as these higher interest rates have begun to bite. But everybody in the last 15 years had a chance to take a bite at the lower interest rate apple. What I mean by that simply is that the rather obvious place is in the whole mortgage space where literally every person in the country took out a fixed rate mortgage.
(11:07)
If they took out an adjustable rate mortgage, they're not willing to raise their hand. But I know from our bank's production of mortgages, it was 99% fixed rate. Of course, we know that average fixed rate mortgage is 3.6%. So from a consumer's perspective, I don't know about your household, but at my household, really the uptick in interest rates hasn't impacted us at all except for the fact that maybe I can earn a little bit of money now in my Vanguard money market account, so corporate America did the same thing. The average corporate bonds maturity increased from nine to 12. So the average treasurer of the average corporation in America was smart enough to term out their lending. And basically we all had a bite at the low interest rate apple and even our government that everybody likes to pick on wasn't stupid enough to just simply borrow money at the short end of the curve.
(11:56)
They pushed the average maturity, the average Treasury bond out as well. So these higher interest rates are taking longer to bite. And then finally, I guess I'll just end with look, the average economic expansion in the last six recoveries has been six and three quarters years. So why was this recovery only supposed to be even today? It's only what, three and a half years old, right? So it's about half that of an average recovery. So just the typical cyclical recovery is six and three quarter years. And of course we've just come off some of the longest recoveries ever. In fact, the last recovery from the subprime crisis to the pandemic was the longest post-war recovery ever nearly 11 years long.
Gary Siegel (12:39):
Where do we go from here, Scott? Is the economy going to slow this year and why or why not?
Scott Colbert (12:46):
Yeah, I still think nominal growth continues to slow as these higher interest rates bite with a lag, but probably the biggest lag ever because of everyone having already termed out most of their debt. It just takes a while for these debts to begin to roll over and have people refinance them at higher rates. We certainly see it in terms of projects canceled, deals that might've been done that got pulled because of a higher interest rate environment, a total shutdown in commercial property apartment financing, that is a third of what it was the prior year, car dealers that tell us anecdotally, but I think we'll also see it in the actual sales this year at six to 7% rates and you're already seeing the subvented financing coming back in finally from the OEMs, but it becomes much, much more expensive to buy that next car. And I think it's, it's slowing activity.
(13:46)
We already saw nominal activity slow last year and I think it'll continue to slow, but it's probably not going to slow enough to push you below the trailing inflation rate. I think pretty clearly the trailing inflation rate's going to be 3% or less next year and then probably approach that 2%. And so all you need is more than 2% growth to have positive real economic activity. And we're looking at positive growth that's probably going to be closer to four to four and a half to even 5%. That's assuming it cools from this past year's pace of 6%.
Gary Siegel (14:20):
So then you're not expecting a recession in the next 12 months.
Scott Colbert (14:24):
I hate to say it, but I was just flat out wrong that pain, in fact that this might be the first admission, boy, that's almost relief. It's almost like it's a relief, right? But I think that we're going to look back on this and say why was the things that drove us towards predicting a recession wrong for the first time ever? And that of course was the inverted yield curve and the collapse in the leading economic indicators. I think because when we look back at this, the pandemic recession was not any of the typical recessions. I mean it was atypical of any of them. We didn't have an excess of things that we normally have that we have to work off in a typical recession. And of course the response of government was an over response, looking back on it, probably more stimulus than we really needed.
(15:05)
And it continued. It still continues to today over the last four years, this is hard to believe. Over the last four years, 6.9% of all economic activity has been borrowed forward. Now of course during the pandemic year you can understand that, but it's really tough to understand why we're still running 7% budget deficits in an economy that's still expanding at a 6% rate if you think there's no multiplier. Alright, that 7% deficit spending is more than nominal GDP. Now, I don't want to get carried away with this because the government always deficit spends. Alright? I think we've had three years since 1955 where the government didn't deficit spend and on average the deficit is over 4% of GDP. So 7% versus 4%, it's not that big a difference, but it is 3%. It's 3% growth. The total recovery total GDP recovery, nominal real GDP from the pre pandemic till today, by the end of the year four years is only 7.7%. So real economic move forward, adjusted for inflation from prior to the pandemic till today is still only 7.7% over those entire four years. So call it eight divided by four, that's sub 2% growth. In fact, it's 1.8 when you compounded, which happened to be exactly what the average economist was forecasting prior to the pandemic anyhow.
Gary Siegel (16:33):
So the Fed is expecting three cuts next year, the markets are expecting about five. And what do you see the Fed doing?
Scott Colbert (16:42):
I think I'd listen to the Fed more than I'd listen to the markets because again, the market's underestimated the amount of increases and I think to the extent the economy continues to recover, it's going to be a slow push down in interest rates next year. So the Fed is going to have to be darn certain that they don't make a mistake and don't have to reverse themselves. So that's why I think it's going to take a little longer than the market expects. And if the economy continues to move and we don't have a recession, there's really no big hurry for the Fed to reduce rates, particularly if the unemployment rate is 3.7% like it is today. They don't want to push this back to an unemployment rate of 3.2 or 3.3 or 3.4% and an acceleration again of wages and salaries, which in the long run, when you look at say the wage and salary growth inflation, the PCE tends to track wage and salary growth less about 2%. And so that would tell you that if you have wage and hour growth at four, they can get the PCE down to two. But if it's five, then the PCE is probably a lot closer to three.
Gary Siegel (17:51):
So what are your expectations for inflation this coming year? Do you see it approaching 2%, hitting 2%? Where are we going?
Scott Colbert (18:01):
I absolutely do because so much of this still is housing and the housing was, here's what happened with the housing and the way they calculate the owner's equivalent rent. They undercounted the appreciation in housing early in the cycle. I think we all watched housing prices soar. Gary, you still in New York?
Gary Siegel (18:22):
Yes.
Scott Colbert (18:23):
Well, you did see rents fall the first year. Remember that the first year of the pandemic rents in New York City came down, my daughter's in Manhattan, rents came down. And of course the OER is a rent-driven kind of process. And sure enough for the first year during the pandemic rents did come down, but then they began to accelerate quite a bit. But home prices didn't really come down. They did for one month, maybe two months, April and May of the pandemic. And then after that they were off to the races as those ultra low interest rates began to entice buyers out there. So what we saw was a surge in home prices while the owner's equivalent rent actually went down the first year. Now you've got a catch up coming. What we have is a basically owner's equivalent rent overstating housing inflation right now, still running it north of six and almost 7%. And I think that continues to cool despite the fact that home prices have already rolled over and rents are declining. So we're still overstating the amount of housing inflation in these statistics and that is going to act as a kind of a wet blanket on inflation because that continues to help pull it downward next year.
Gary Siegel (19:31):
So where do you see the consumer going? What are your thoughts about consumer spending and consumer confidence?
Scott Colbert (19:39):
We did see the big jump in confidence, as you might expect with the stock market having bounced, I always say consumer confidence is coincident with the stock market. And sure enough, from basically the first hint of the Fed pivot on October 27th and the first hint of A PCE getting down towards 2%, we've seen the market take off like a rocket. So consumer confidence has been jumping, but it been pretty simple. Consumer spending tracks basically employment growth plus wage and salary growth. And when you think about it, it's really pretty simple. If you have to play armchair economist at home, all you want to know is how many more jobs is a percent of the job market are going to be created? How much more are you going to pay these folks? Because we're a country that tends to spend every penny practically that we make.
(20:23)
In fact, weirdly enough, the savings rate right now is below its long-term historical average, which also was a hint to me that there was a potential recession around the corner. Why is it that people aren't saving as much money? I said, well, they're spending some of the money to keep up with inflation. But lemme get back to the simple math of it. In the last quarter we created 538,000 jobs. Now mind you, there will be some adjustments of that. And believe it or not, over the course of our lifetimes, they will adjust that number nine times.
(20:55)
So let's assume that 538 is even reasonably right, but let's call it 500,000, that's 2 million jobs a year. Well, how many people work in this country? A little less than 160 million. So if somebody's smart enough on the phone to divide two by 160, I know that number's more than 1% and it's less than one point a half, let's call it 1.4%. And our wage and salary budget here at say our bank is three and a half percent, I think everywhere it's going to be three and a half to 4%. So let's call it three and a half percent, 1.5%. That's basically 5% more money coming into the economy, 5% more. And so there's consumer spending for you growing at 5%. It also happens to be almost exactly what nominal GDP is likely to be 5%. That's your first cut at guessing what nominal growth is.
(21:42)
Then you subtract out the inflation, and now the other 30% of course is government spending imports and exports and business investment, which I do think cools, right? I think business investment continues to cool as it faces higher interest rates. I think that our exports slow and our imports continue to increase with the strength of the dollar really over the last four years or so. And then finally you've got the government, which might be the wildcard on this, to the extent that they can run a deficit less than the 6.3% that they ran this year. That could be the thing that pulls GDP down from 3% or two and a half to closer to 1.5% if we can get some fiscal restraint.
Gary Siegel (22:29):
Before I go on to my next question, we have a question from the audience. How concerned should the Fed be about the impact of commercial real estate repricing on the banking sector?
Scott Colbert (22:43):
Well, the simple answer to that is I think from an economic perspective, we ought to all be concerned about it. From a top-down basis, there's about $5 trillion of commercial real estate debt. Now, obviously quite obviously since there's only about $15 trillion, $17 trillion of debt in the commercial banking system, it's obviously not all there. And I do think the commercial banks actually do a reasonable job of underwriting it because they know where the deals are. They're in their backyards largely, they're not prone and they're regulated. More than half of this debt is in the commercial mortgage backed securities market, the CMBS market. There we do see, see basically no refinancing of any commercial property that's ballooning. So let me say that simply put, almost all these loans are 10 year very low amortizing ARMs, mortgages of that balloon, 10 year mortgages. And so the mortgages that are maturing today and next year in 2024, 2025 were put on in '14 and '15.
(23:44)
And you're looking at valuations that typically are much less than half, but perhaps even as much as a third of what they were. And so I think you're going to see this ongoing build of default and loss accrue in the commercial sector. Is that enough in and of itself to bring the economy to halt? No, but it's the compounding effect. Are there levered investors in this? Are there subordinate levered investors in this? I think the banking system has this pretty much covered, but a lot of this debt is out there in the private market, and that's where you're going to find out how much it impacts the people that have basically supported these deals that have bought the subordinate notes. Because even the AAA-rated senior securities only have 30% credit support. And if in fact you've got a 50% write down on the commercial side of these things, you're looking at potential losses even for AAA investors and in commercial mortgage backed securities.
(24:40)
So it's clearly the straw that is likely to break the camel's back. But what are the contagion effects of this? People went wrong in the subprime crisis. They looked at it like this. Only one fourth of all U.S. mortgages were subprime and you said, okay, maybe the losses are 50 cents on the dollar in the subprime space. That's still only X amount of capital. But it turned out that basically the losses began to compound, didn't they? They pulled down investment grade ratings at the banks. All of a sudden then Lehman's commercial paper fell below par and the money market funds, there was a run on the money market funds and we realized that AIG had guaranteed all this property. So it's the compounding effects of this that are likely to be the culprits, but the rather obvious direct impact is going to be slow and ratcheting up over time.
(25:34)
I don't think it's enough to push us into recession, but it'll be one of the things that is additive to it. Let me give you a real specific example. I'm in Clayton, Missouri, which is a very nice suburb. It's where all the offices have kind of migrated to. It's a very nice downtownish environment, but there's a lovely Mexican restaurant, it's franchise down the street that's closing, and they closed because even today they said traffic is only 40% of what it was pre pandemic, and that's what all these business districts are having to face. It's not so much the commercial property that went bust, but let me tell you that the Mexican restaurant and all the employees are now out of business.
Gary Siegel (26:14):
So with inflation declining, Scott, what investment opportunities could unfold in 2024?
Scott Colbert (26:22):
Well, our number one go-to investment is high quality investment grade, longer duration bonds. That's our primary conviction. I'm a little surprised that we got as good a return as we did last year out of the bond market, given the fact that everybody and their brother knew that they were going to be raising rates, which they did. But the 10 year Treasury, weirdly enough started at 3.88% last year. It ended the year at 3.88%. Now of course it's creeping up to four. The market was ahead of itself in terms of the pivot, but we think that basically longer duration, higher quality assets are an awfully good bet. And just simply something, a sector of the market that's grossly underperformed for the last four years has just been U.S. mortgages or let's just say the Vanguard Ginnie Mae Fund, but now you're looking at mortgages, say a 30 year pass through with much more than a hundred basis points, but probably not 140 basis points of incremental yield and a discount of say, $85 to par.
(27:17)
So $15 discount. You're just looking at being able to clip 120 to 130 basis points of excess yield just in the mortgage market alone. It's underperformed Treasuries of course, because it was negatively convex in a rising interest rate environment. But now a lot of that negative convexity has been pushed out because they're at such discounts. So we think that's a pretty simple go-to straightforward investment after that. It's going to become pretty complicated, isn't it? The equity markets are back to being relatively fully valued with the S&P 500 having jumped 27% last year. It broadened out as the market went on. So I think if you're going to find better opportunities, they're likely not to be in those magnificent seven. Those magnificent seven by the way, while they were up 75% last year were down 40% the prior year. So I wouldn't want to bet your livelihood on just those seven or eight stocks that pulled the S&P 500 down.
(28:10)
Emerging market stocks were the one area that was negative last year. And commodities, the Chinese stock market on a relative value basis is as dirt cheap as it's ever been. But you have to bet that you can get some of your money somehow out of China if China would just basically begin to cooperate even remotely and become a bit more of a world player than they'd been willing to be. There's probably an awful lot of value to be unlocked there. But they still have huge problems in China, so we're not even going there. So bottom line, investment grade, high quality, fixed income is our number one go-to. We still think that stocks are likely to perform well. If the Fed cuts rates at all, eight out of 10 times that generally means a positive return for the equities over a 12 month market. When it hasn't worked out, it's because we are heading to a recession. Alright? So if the Fed is cutting because there's a recession on the horizon, then forget that stock price. But if it's for the soft landing, equity's going to do okay. Too much tougher to say about international assets because so much of that is dollar related and then even tougher to talk about emerging markets. With so much of it being China dominated,
Gary Siegel (29:18):
What is your outlook for the municipal bond market this year? Where do you see yields going and will issuance rebound?
Scott Colbert (29:28):
Well, the municipals in general state and local governments are in better shape than they've ever been. They didn't participate in the deficit spending that our U.S. government did. So as a percent of GDP total municipal debt has come down. So we like the credit quality municipal space. At the same time though, they also are proportionately relative to say investment grade bonds fairly rich. In other words, a typical 10 year GO obligation AAA rated GO obligation is not as cheap as it normally is relative to a 10 year Treasury. So municipal bonds had a surprisingly positive return last year as well. One place to possibly look for total return in the municipal space are some of these bonds that are kind of, that nobody wants to buy that are orphan with these ultra low coupons because you can buy them at a pretty good discount to the market because part of the return becomes taxable.
(30:24)
But from a credit perspective, we like the municipal market. It's already a little ahead of itself, even further ahead of itself than the investment grade market in terms of recovery and outlook. But you're back to being able to also make on a tax adjusted basis something that's a positive real return. We think municipalities in general are in awfully good shape. Now, you still have to be very, very careful about what type of municipal bonds you're buying Once you move out of the state and the local government and school district type, there's a number of one-off deals backed by sales taxes that are blowing up. Huge one in Arizona right now. We've got a gorgeous mall area in Johnson County, Kansas, which is the wealthiest part of Kansas that's defaulting on 65 million worth of bonds right now. They can make the cashflow because the sales tax revenue is enough to pay the coupons, but they can't amortize the debt. So you still got to be pretty picky about what you're looking at in the muni market. And a lot of it, of course, will be interest rate driven. And since we think interest rates have likely peaked or close to peaking, we like muni bonds as well.
Gary Siegel (31:33):
Do you think issuance will increase next year?
Scott Colbert (31:37):
Yes, it will. They've held back on issuance post the pandemic, and they weren't sure where their tax revenues would be, but sales tax revenues are in the process of recovering. Clearly. Property tax revenues have grossly recovered. I think you're going to see more municipal issuance on a year over year basis.
Gary Siegel (31:58):
We're running out of time, Scott. So one last question. What questions are you getting from clients and what are they worried about?
Scott Colbert (32:07):
Well, the number one question I always get, even though I'm the bond guy, is what do you think about the stock market? And what I tell 'em about the stock market is, look, we got a huge bounce back after having had a horrible year. It's almost exactly what you'd expect. But the stock market is entirely dependent going forward on whether we do or we don't have a recession. If we avoid the recession, you're going to want to buy stocks. We're going to have that soft landing. It's going to continue to make some forward progress. The second question I get is, will we or won't we have a recession, and this is where I'm still a little befuddled because all the forward indicators would still tell you that the probability is there. But clearly when you just look at the simple underlying numbers, I was talking on name drop for a second,
(32:52)
one of the senior economists at Goldman Sachs, they were very sharp last year about June in saying, listen, this call for a recession is overrated. They kind of took you through why. But really it was more along the lines of what I just talked you through with the employment growth. If you can have any job growth plus the rising wages, that's likely to be higher than nominal than inflation. So you're likely to have some real growth. And so I still think that there's a modest probability of a recession because historically we still have an inverted yield curve. We still have the leading economic indicators falling, but it may be just different this time. And the difference is that this recovery is post pandemic. So that's the second question. Will we or won't have a recession then? The third ones are usually unique, but I will say it also has a lot to do with that commercial property as one of your listeners just asked.
Gary Siegel (33:46):
Well, I'd like to thank you Scott Colbert, executive vce president and chief economist at Commerce Trust Company, and I'd also like to thank all those who tuned in to listen to us. Have a good afternoon everyone.
Scott Colbert (34:01):
Thank you, Gary.
