The U.S. stock market has been flashing an important signal that suggests concerns about the banking sector have dissipated after the sudden collapse of Silicon Valley Bank earlier in March.
The index, often referred to as Wall Street’s “fear gauge,” was down 1.7% at 18.70 on Friday after rising above 30 on March 13, the first trading day after regulators announced emergency measures to stem fallout from Silicon Valley Bank’s failure. “Those worst fears have been taken off the table, at least for the time being. I think you’re just seeing a reflection in the markets of that fact,” Grahn told MarketWatch via phone.
Investors are effectively saying “there will be so much pain coming through the system so that the Fed cannot make an argument that holds water for why they want to keep the rates high,” said Grahn. “The risk sensitivity between what the market is pricing in terms of rate increases and where the Fed is telling the market that they’re going to be is way too wide. And the way that the market can be right is if we have a disastrous couple of months ahead of us.
“So far, equities are holding up and economic data has not materially faltered, but I can say with confidence that moves of this magnitude in the Treasury market are not typically signals of smooth sailing ahead,” said Liz Young, head of investment strategy at SoFi.
It's certainly something to keep an eye on. Thanks for sharing!
Money never sleeps
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It's great to see that the banking sector is stabilizing and this could be a great opportunity for investors to take advantage of the potential rally!
Don’t kid yourself, there is no stability in the banking sector & anyone still in the stock market needs to know they are straight up gambling now.
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