![]() The Dow dipped into the red minutes before the close, finishing -0.30% on the session. Thus, while we don’t wish to make light of whatever contagion there may be here in regards to these bank failures (though the banking industry has more solid regulations than it did back in the financial collapse of 2008, so that’s not a reasonable fear), we do see a chance the Fed pumps the brakes here - and market participants may respond by picking up some relatively low-priced equities. What a difference a week makes! It seems like a long time ago, but early last week JPMorgan ( JPM Quick Quote JPM - Free Report) CEO Jamie Dimon was openly musing about a rise to 6% interest rates. Most likely, therefore, we’re looking at 25 bps - and, depending what happens after that, maybe staying pat at 4.75-5.00%. ![]() According to the Fed’s own dot-plot from late last year, its preference had been to get to a tail of 25 bps hikes before pausing and seeing how the high rates affect different elements of the overall economy. If there’s one thing we’ve noticed in the past two trading days that we hadn’t seen in a while, it’s that pricing-in a 50 bps hike a week from Wednesday is no longer being talked about. government is already stepping in to backstop depositors, this could be a sign of things to come. Bank collapses are credit shocks, after all, and even though the U.S. However, it’s also possible that this is a sign that the Fed’s interest rate hikes - 450 basis points (bps) in the past year, the highest and fastest ratcheting-up in more than 40 years - have begun to curb inflation, and may do well to consider pausing here before anything more widespread breaks. These are industries that have been through a rough few months, so it might stand to reason some mismanagement in the front office may lead to such circumstances as these. All three did much of their business in specialized, higher-risk areas such as tech startups and crypto investments. banks having gone under in the past week: Silicon Valley Bank (SVB), Silvergate before that and now Signature Bank.
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