As some companies continue to delay buying decisions, Michelle Weisenbach says the declining interest rate environment is signaling companies to invest in technical improvements.
Michelle Weisenbach, senior vice president and market leader at Wells Fargo Commercial Banking, says her company’s models predict a declining interest rate environment in 2024 — but even that could lead to volatility.
The Federal Reserve began raising interest rates to cool inflation in March 2022, and raised rates 11 times before signaling its expectation to reduce interest rates in 2024 based on official projections released on Dec. 13. While those projections were compiled by 19 Federal Reserve officials, most expected at least three rate cuts in 2024 due to inflation declining faster than expected.
The global economy is also being rocked by two wars in Ukraine and Gaza, with more countries announcing their intent to engage in armed conflict. This month, Venezuela held a successful referendum declaring sovereignty over Essequibo, a contested mineral-rich territory that accounts for two-thirds of neighboring Guyana’s territory.
Weisenbach says the volatility in the market is making many Wells Fargo clients come to her for advice on how to proceed. She tells Oregon Business that the coming business environment is going to favor companies willing to come out of hibernation and spend the capital they need to embrace trends in AI and recruitment.
This interview has been edited for length and clarity.
The Fed is signaling a rate decline in 2024. How are you telling your clients to prepare?
I think that the models and the market are suggesting rate declines next year. The question is, how much and how many? You see predictions all the time of people saying, “The market thinks rates are going to go down X number of times” and then there are economists who say it’s a different number. Everyone’s trying to figure out if they’ll do go down, when they’ll go down, and what that means.
I think some companies have been on hold with some of their purchasing decisions because of uncertainty around interest rates and not knowing how high would they go or what the impact would be on their business. As rates do start to come down and people start to have some certainty about the future, there will be buying decisions that will become near-term, and they will want to lean in and do that.
The thing that is helpful for business owners to be thinking about is how you can achieve your particular goals and objectives recognizing there’s uncertainty in the market today. The path forward isn’t crystal clear. And you have to think about how those things impact your company versus getting caught up in the whole world view of everything that’s happening globally, rather, really focus on what’s happening here at home.
But there is a lot of volatility globally. There are two wars currently underway in Europe and the Middle East, as well as an escalating conflict in South America. How are you seeing these conflicts affecting the companies you work with?
One of the things that we rely on with the work that we do here at Wells Fargo, is to talk with our folks who really follow the foreign market, so businesses can make the best decisions for themselves in their company around their risk tolerance, their rate sensitivity analysis, and the stress testing they do in their business, to see if it’s the right time for them to make a decision and move forward with a particular project.
With the conflict between Ukraine and Russia, we have customers who may have historically purchased products and services from that part of the world. As the conflict continues and that war intensifies, we have businesses that we’re working with today who are asking “Should we continue to buy a particular product that is produced in Russia or do you need to find alternatives and how does that affect your business in the future?”
What sort of buying decisions will companies need to make in 2024?
When Interest rates come down, there is often a conversation about how you are investing in your business. Where are these places where you can embrace additional technology to bring efficiencies into your company and how do we deal with some of the labor shortage issues that all companies are facing today?
There is a lot of equipment that you can bring in that helps you do something faster, do it more effectively, and do it more accurately. An example recently, I was talking with a business that brought in a laser cutter rather than cut material by hand. The laser is faster and it’s more efficient and reduces the amount of waste. To be able to make those kinds of investments are the types of things that we’re talking with our customers about as the industry environment normalizes a little bit and then next year.
What are the technologies you most look forward to seeing advance in 2024?
We’re often engaged in technology conversations around how we can help clients manage their business more efficiently, by minimizing fraud and other things that could be challenges creating efficiencies. I think that when we as a country and as a global economy lean into AI projects, and see what AI can do and how it can help us take technology even further, that will be very exciting, and a conversation that will engage us all as we think about how we can improve business.
One of the things that AI can do for us is to look at where there are places where we can pull information together. As an example, if we’re working with someone within their accounting system, we can see patterns and use AI to develop those patterns further. We can help make sense of which payment should go in which direction, we can say this payment should be handled with a credit card that payment should be handled through ACH, and we can use AI and those kinds of technologies to make the process even more efficient and more accurate.
I think those are the places we’re going to continue to see that development. And in customer service and other types of routine chat functions and areas where artificial intelligence can do a really great job. I think there’s still a lot of work to do to understand how we can use AI and how we develop that, and I think that will be a really exciting thing to see as we progress into the next year.
One of the issues that a lot of companies domestically are facing is a shortage of workers and a lack of people who have the proper qualifications to fill open positions. Do you see that as being a continuing constraint on the companies?
I think in the short-term, companies have been thinking about how they approach that. I’ve seen companies investing in training programs to get entry-level employees into their businesses, to train up the talent that they need, and to think about ways that they can train the generation of the future to be the kind of workers that they need to support their businesses.
They can do this either by themselves or in partnership with other organizations that have similar goals and objectives and try to find ways to train people that you would want to hire to be part of your company and make those investments to attract the type of workers that they need.