Investors are misreading the SVB depositor rescue, and shouldn't be buying stocks yet, warns Morgan Stanley's Mike Wilson

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Morgan Stanley's chief U.S. equity strategist warns investors are wrongly interpreting the U.S. rescue for bank depositors as a sort of quantitative easing.

Judging by stock futures, one wouldn’t guess we’ve come off a wild weekend that joined up two of Switzerland’s biggest banks, one in deep trouble. A flat to slightly lower start is ahead for Wall Street, but oil prices are under pressure and gold is up a lot.

“From an equity market perspective, the events of the past week mean that credit availability is decreasing for a wide swath of the economy, which may be the catalyst that finally convinces market participants the equity risk premium is way too low,” says Wilson. After all, the Fed is lending, not buying. “If a bank borrows from the Fed, it is expanding its own balance sheet, making leverage ratios more binding. When the Fed buys the security, the seller of that security has balance sheet space made available for renewed expansion. That is not the case in this situation,” said Wilson.

As a reminder, Morgan Stanley’s strategist, nicknamed “worried Wilson,” earned plaudits on Wall Street for correctly anticipating the 2022 bond and stock selloff — the S&P 500’s worst year since 2008. For 2023, he’s among the most pessimistic, forecasting a 3,900 finish for the index.The markets Stock futures ES00 YM00 NQ00 trimmed losses, and the 2-year Treasury yield TU00 has pared a steeper drop to 5 basis points. Crude prices CL.1 are down 3%, while gold GC00 is up 0.

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Silicon Valley Bank depositors, needless to say, have been rescued so quickly because they are cronies and insiders. FDIC and CFPB take eons to rescue ordinary depositors.

Buy gold👍

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Company was 'jerked around' by SVB collapse, says small business ownerA small business owner with all of her money in SVB says the company was 'jerked around' by the 'failures of the American banking system' Ha ha’jerked around’ yeah that’s right they were ‘jerked around’ by needing to run as an actual liquid bank with enough capital, rather than some clown outfit that thinks banks can run on a deficit with mass withdrawals. Chances are her business will also fold with her acumen. We all make choices, that small business owner made her choice for whatever reason. Personally not a fan of local, regional, or area banks as some are called. After having issues with regional bank, moved to big house bank. Make good choices and decisions, that's the key.
Source: BusinessInsider - 🏆 729. / 51 Read more »