Banking concerns and Fed policy were the primary market drivers last week, raising anxiety for many. Equities were generally flat and varied across the indices, as the S&P 500 gained 1.41%, the Dow Jones 1.18%, and the NASDAQ 1.66%. Bond Markets rose, as banking concerns continued and Federal Reserve policy action came in at the expected 0.25%. The Bloomberg Agg rose 0.66%. Alternatives were mixed in the flight to safety, with Bitcoin futures up 0.3.06%, gold up 0.52%, and silver up 3.90%. Anxiety will likely continue, as the banking concerns unfold in the coming days.Last week saw the Fed adding a focus on banking stability in their guidance going forward, in light of the current fears of systematic banking risks. The FOMC next announces policy May 3, with markets expecting the decision to be holding the current rate with a stop to rate hikes and markets further pricing in rate cuts by year end.
Banking concerns were mixed with fears of contagion ebbing and flowing. Initial prospects of Congress extending FDIC insurance from the current cap of $250,000 per account to possibly every dollar were slashed by pockets of resistance. Extending FDIC insurance is viewed as a way to quell bank run concerns of many larger balance holders, as they could flee for fear of losing their money, like the initial concern at Silicon Valley Bank and Signature Bank. In the cases of those banks, the FDIC has come to insure every dollar in an attempt to mitigate systemic risks. First Republic Bank, a bank with similar unrealized bond losses and large depositors, led the uncertainty and traded between $11.52 and $21.59. Regional bank and small business health are data points we will be watching in the days ahead, as clarity is hoped to be had on regional bank prospects.
Economic data last week saw continuing jobless claims come in a hair over expectations at 1,694k versus 1,690k consensus for a ~14k bump week-over-week. Initial jobless claims came in lower week-over-week at 191k vs 192k. The bump up in continuing jobless claims, while initial claims remain low, may indicate some slowdown in hiring for companies absorbing jobless workers. On Friday, Durable Orders (Seasonally Adjusted, Month-Over-Month) reported a downward surprise of 1.6% printing at -1.0% versus the consensus of 0.55%. Lowering durable goods orders are often seen as a recessionary indicator, as companies cut capital outlays when business prospects dim and increase capital outlays when business prospects are bright.
In geopolitical events, Russia announced over the weekend it had stationed tactical nuclear weapons in Belarus, a further provocation as the war in Ukraine continues. In France, the protests continued against President Macron’s raising of the retirement age from 62 to 64. TikTok CEO Shou Zi Chew testified to Congress on Thursday regarding the app, as increased concerns over connections to the CCP and national security embroil the app. Several lawmakers have introduced legislation to ban the app in the US, but many question if TikTok is too popular to ban.
As uncertainty continues to cloud market forecasts and the skies remain turbulent, we continue to remain affixed on economic indicators and policy. 1 Peter 5:7 states, “Cast all your anxiety on Him because He cares for you.” As markets (and investors) are anxious, we seek solace, and pray you are able to listen to these words and cast away anxiety for calm that surpasses all understanding.
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