Market Update - Thursday 16 March 2023
Bank failures = equity rally. But of course!
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Ignore The Noise And Focus On The Signal
Nothing about the bank failures in the US is based on the real-world economy, which is strong on all measures (GDP, jobs, confidence, etc). Silvergate is crypto specific and Silicon Valley Bank’s failure was simply idiotic management actions as regards (1) the choice of assets to match deposit liabilities and (2) their handling of the crisis by walking for help straight into the jaws of the industry now devouring the carcass.
What the banking crisis has done is to change the Fed narrative from tightening to neutral. And this, coupled with the strong real economy, is what lies behind the strength in tech right now (tech being the most rate-sensitive of equities).
Nothing in the current market should be a surprise if you view through this lens.
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