Market Musings 4/6/2023

Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!

Despite initial market concern, investor optimism surged in March with the #BankingCrisis stabilizing, end of #RisingYields hope and expectations for a #Recession2023 soft landing.

March was a rollercoaster for markets. The S&P 500 ended on a high up 3.5% in March, but also fell as much as -3% during the month. The volatility was largely driven by Silicon Valley Bank’s sudden failure with larger market #RisingYields implications.

On Friday, March 9th, Silicon Valley Bank (SVB) collapsed in the biggest bank failure since the 2008 Financial Crisis. Like a self-fulfilling prophecy, reports of liquidity issues created a bank run from start-up depositors withdrawing en masse leading to bankruptcy. Initially, SVB’s failure sent markets tumbling with worries of contagion.

Other banks tumbled on bank run concerns particularly smaller, regional banks. Meanwhile, many technology companies banking with SVB were scrambling from uncertainty of their cash availability in excess of the FDIC’s $250K insurance. To stabilize the system, the FDIC offered to guarantee all deposits at SVB and opened credit for other banks in need of lifelines. While rocky for a few weeks, the US banking sector fairly quickly stabilized with ultimately less deposit shifting away from smaller banks than feared.

Leading into the #BankingCrisis, the Fed commentary was turning increasingly hawkish for higher #RisingYields to combat stubbornly high #InflationFears and strong resilient #LaborMarkets. However, market expectations began shifting. Investors began speculating that the Fed wouldn’t be able to continue aggressive rate hikes without further impacting the unstable banking system.

At the March meeting, the Fed ended up adding another 25bps rate hike, but paired with dovish signaling that #RisingYields may be coming to an end. Markets rallied. Combined with more positive economic data, investor optimism surged with the #BankingCrisis stabilizing, the end of #RisingYields (and quick reversal) and a #Recession2023 soft landing (if at all).

All year, investors have seemed hungry for the next bull market rallying on end of #RisingYields speculation. While we’re cautiously optimistic and see #RisingYields likely ending soon, we think the market is getting ahead of itself again especially with how fast the Fed will begin lowering rates. We believe the market is bottoming, but likely to trade in this range until better visibility on when #FallingYields will begin.

Given the aggressive market optimism recently, we wouldn’t be surprised for some pullback in April. We would recommend taking advantage of any pullback to add to portfolios.

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As of the publish date, Ursa portfolios don’t own SIVB with no plans to open any positions in the next 5 days. The stocks mentioned in this article may cease to be owned by Ursa portfolios at any point.

The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.

Original Photo by Stas Knop