Edition #20- Monday March 13th 2023
Quiz Question of the Week ❓
Answers at the bottom!
This Week in History 📰
March 14th, 1879 - Albert Einstein (1879-1955) was born in Ulm, Germany. His theory of relativity led to new ways of thinking about time, space, matter and energy.
March 15, 44 B.C. - Julius Caesar was assassinated in the Senate chamber in Rome by Brutus and fellow conspirators.
March 19, 2003 - The United States launched an attack against Iraq to topple dictator Saddam Hussein from power.
Summary 📝
FEAR!
The markets were spooked by the collapse of multiple overstretched banks, as Silvergate Capital, Silicon Valley Bank, and Signature Bank all announced their liquidation, or were taken into receivership.
What happens next is anyone’s guess. With the next round of CPI data coming in tomorrow, the Fed has a tough dilemma to confront. Do they bail out banks, and bring about some stability, which could potentially spike inflation, or do they allow a contagion event to spread, causing a heavy recession, but bringing inflation down?
The appetite for a 50BPS hike in interest rates climbed last week as jobs data showed the economy was still in great shape. A steeper rate hike was 70% likely at the time, with a 25BPS only 30% likely at the next FOMC meeting.
Following the collapse of several banks over the weekend, Goldman Sachs has suggested they are now pricing in no rate hikes at the next meeting, with the market generally 50/50 on a 25/50BPS move.
I expect the next two weeks to be rather volatile. The banking sector is unlikely to have a secure footing until there is clarity on the level of exposure each has following the various collapses. With CPI tomorrow, and the FOMC meeting next week, now is a good time to check you are happy with the risk balance of your portfolio, and keep some cash ready for use if we see some further downturns.
Major Events This Week 🔬
MONDAY, MARCH 13
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TUESDAY, MARCH 14
US CPI
WEDNESDAY, MARCH 15
ADP employment
UK Budget
THURSDAY, MARCH 16
Building permits
FRIDAY, MARCH 17
University of Michigan Confidence
Incoming Earnings Reports This Week
Provided by Earnings Whispers
Provided by Unusual Whales Futures
Post of the Week 💌
✅ One of the biggest issues in the investing community is the investment gender gap. This is likely a direct result of the well known gender pay gap, and needs to be closed globally as soon as possible. 📈
✅ At present, the gap means women in the UK alone may be missing out on as much as £600bn in pensions, portfolios, and investment returns, larger than the entire GDP of Switzerland. 🤯
✅ Studies have shown that confidence and the cost of living have historically been the primary blockers for new investors, with only 28% of women responding that they have invested before. 📉
✅ Whoever you are, and however much you have to invest, your money can be working for you. If you’re willing to learn, do the work, and stick with it, investing can do great things. 🥳
✅ The same studies have shown that women are typically better investors, with greater use of risk management tools such as stop losses, being less prone to Overtrading, and starting younger. ⛔️
✅ The last few years have shown promising signs, with 50% of young women either starting to invest, or planning to in the next 6 months. This is up 30% on the same survey a decade ago, meaning that more women may be starting their journey towards financial independence than ever before. 🥳
✅ However, the key issue of the gender pay gap remains intact, making any notable changes to the investment gap hard to achieve. 😐
✅ By engaging with the topic, having meaningful conversations, and putting this to action across society, there’s hope that the gap will close, allowing everyone to achieve the financial independence we all deserve.
🔥What’s Moving Markets? 🏃♂️
Silicon Valley Bank collapse hits startups as far away as China
U.S. regulators shut down Silicon Valley Bank on Friday in the country’s second-biggest banking failure.
The bank was popular with tech startups, including those based in China and backed by U.S. venture capitalists.
The online system for opening an account at SVB had allowed the use of a Chinese mobile number for verification, a Chinese tech startup founder said.
UK’s taxes are at a 70-year high. But its finance minister won’t splash the cash at upcoming Budget
British Finance Minister Jeremy Hunt will deliver the government’s Budget commitments on Wednesday against a better-than-expected economic backdrop.
Economists expect only modest fiscal easing after a marked improvement in the country’s public finances, as the government keeps its powder dry for now.
Goldman Sachs no longer expects the Fed to hike rates in March, cites stress on banking system
“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” Goldman economist Jan Hatzius said in a Sunday note.
The firm expects the latest measures to “provide substantial liquidity to banks facing deposit outflows” and boost confidence among depositors.
Chart of the Week 📈
The collapse of SVB could go either way. The response from the Fed over the weekend will secure the deposits of customers, but fear is far less rational than the solution presented. All regional banks with exposure to riskier assets will likely come under pressure, and the banks with relatively safe balance sheets will still likely be punished.
The banks which demonstrate strong cash reserves, liquid assets, and flexibility in rising interest rates will come out of this well. However, with fear spreading into venture capital, and less resilient startup companies who have never had to experience the constraints from rapidly rising interest rates, plenty of bumps in the road are likely ahead.
Investor’s Toolkit ⚒️
Unusual Whales- Options Flow and Analysis
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Disclosure ✅
This newsletter provides general information only. Before making any financial or investment decisions, please consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
Quiz Question of the Week- Answer ❓
Answer B- 16th
Until last Friday Silicon Valley Bank was the 16th largest bank in the US, worth more than $200bn. (The Guardian)