It's March Madness, but with this week's news, it's hard to tell if we are talking basketball or the banking industry!
On this week's Jarvis® Update, CEO Noland Langford and Director of Research, Brian Dress, discuss the failures of Silicon Valley Bank and Signature Bank, along with the troubles at First Republic (FRC). We first give our thoughts on how investors with money particularly in regional and community banks should proceed in light of the news. The most important thing is first to make sure your bank is FDIC insured and second, if you have cash over and above the level of FDIC insurance, you should consider decreasing the concentration of your savings in one institution.
We think, however, that think banking mini-crisis creates opportunity for investors. First of all, we think this episode marks the end of the Fed's rate hiking cycle. We may see one more rate increase next week, but clearly the pace of rate hikes has created a structural problem in the banking industry that means rate increases cannot go on forever.
With rates moving lower (the 2-year US Treasury rate dropped from over 5% to under 4% in just one week!), we are starting to see outperformance in growth and tech stocks. The NASDAQ has consistently performed better than the other indexes in the past few weeks.
Now is certainly not the time for panic. Rather, we are rolling up our sleeves and looking for opportunities, not only in growth stocks. But also we are liking the chances we are seeing to lock in very generous rates of return in corporate bonds before rates start falling again in late 2023.
Topic 1: A Good Old-Fashioned Bank Run -- Should We Expect Contagion?
Topic 2: Growth Finds Its Footing