As banking execs put on a happy face to try and calm a jittery financial system, there is a realist among the smiles: new TCW Group CEO Katie Koch.
"One of my main takeaways is that people look a little too happy for me here," the former Goldman Sachs money manager said on Yahoo Finance Live (video above) at this week's Milken Conference.
TCW boasts more than $200 billion in assets under management, so Koch's views hold a lot of gravitas.
"We're really looking, at TCW, for a macroeconomic environment that's going to be pretty challenging," Koch said. "And so we're in the camp of having a medium to hard [economic] landing. What I would say is that I don't think the rest of the sentiment has caught up to that view."
The economic challenges look to be piling up.
PacWest (PACW) stock crashed by 50% in early trading on Thursday. The plunge in the West Coast regional bank comes as it said it was weighing a range of strategic options, including a sale or capital raise.
Extreme selling pressure has spread to other regional banks this week, including Comerica (CMA) and Zions (ZION).
The week began with regulators seizing regional bank First Republic (FRC). JPMorgan (JPM) then swooped in to purchase a majority of First Republic's assets.
It marked the largest bank failure since the 2008 financial crisis.
"As we look at the overall US banking system, this is a strong [system], this is a safe [system], this is the envy of the world," Citi CEO Jane Fraser said on Yahoo Finance Live.
Despite the banking turmoil, the S&P 500 is down less than 1% in the past month. It's up roughly 6% on the year.
But the negatives for markets are becoming too hard to ignore for Koch and the other realists that Yahoo Finance chatted up at the Milken Conference.
Koch believes the economy is headed into a credit crunch, in part fueled by the rolling banking crisis that continues to unfold. As that lending plays out, Koch thinks it could begin to weigh on the commercial real estate market.
"[Regional banks] have this dual pressure from both deposit outflow and their commercial real estate exposure, and that's going to put pressure on those banks," she explained. "It's going to put pressure on their ability to extend credit, which in turn is going to put pressure on the economy and jobs. We are quite worried about that, and that really underscores the base view as to why we're in the more bearish camp."
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com
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The Link LonkMay 04, 2023 at 10:44PM
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Everyone in the banking space is 'a little too happy' right now: Top money manager - Yahoo Finance
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