Stocks in Europe and the U.S. are trading slightly higher in pre-market trading, following losses in Asia and heavy losses in the previous week. However, demand for safe-haven assets remains high as investors assess the stability of the financial sector and the Fed's current stance ahead of a rate decision that could raise expectations that the world's top central bank will further taper its monetary tightening measures.
Banks that ran into trouble after the SVB collapse, such as First Republic Bank and Credit Suisse, fell sharply again. Also UBS, which fell after the announcement that it would take over Credit Suisse.
In my opinion, the markets are still to risk averse giving the fact that the banking crisis results likely in an earlier Fed pivot. The UBS takeover is positive and much better than the uncertainty of whether Credit Suisse can withstand the unrealized losses and dwindling confidence after recent developments. The Fed and five other central banks announced coordinated actions to increase liquidity in U.S. dollar swap agreements to ease tensions in the global financial system – more positive signs aimed primarily at easing market's concerns. I still don't expect Wall Street's big banks to get into serious trouble, but the general turmoil in the banking sector will continue for now – especially given signs that banks will face higher funding costs in the near future.
Also, recent signs that inflation is cooling after the typical spike earlier this year and overoptimistic investors reduce the likelihood that the Fed will stick to its hawkish stance and rhetoric.
I expect the USD and US Treasury yields to continue to fall, which will help to prolong the USD normalization process.
Demand for safe havens, such as the JPY and gold (and bonds), continues to remain high. The CHF is underperforming for the time being due to the turmoil surrounding Switzerland's two largest credit institutions. I also expect interest rate sensitive assets such as cryptocurrencies and growth stocks to continue their outperformance.
👁 ROB'S MARKET OVERVIEW:
March 20 – 2023
🇺🇸 US Markets ↕️/↗️
Cyclical Stocks ↕️
Tech/Growth Stocks ↕️/↗️
Financial Stocks ↕️/↗️ (recovering from sharp losses)
Defensive Stocks ➡️/↗️
Energy Stocks ➡️/↗️
💱 Forex
JPY, GBP, EUR ↗️
AUD ➡️/↗️
CAD ➡️
CHF, USD ➡️/↘️
⚒ Commodity Markets ↕️/↗️
Oil prices ↕️/↗️
Natural Gas prices ➡️/↗️
Metal prices ➡️
Precious Metal prices ↕️/↗️ (remains volatile; testing $2,000)
⚡️Cryptos ➡️/↗️ (benefiting from lower bond yields)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Yours, Robert 🏦🔍🤔📉📈
