Weekly Market Update with Brian Ransom 17 March 2023
Welcome to the weekly market update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth and here’s what happened in the market this week.
The market actually rallied this week despite all the craziness in the regional banking industry that included one more bank failure and two more bailouts this week.
There have been several developments since the update last week. Over the weekend, another West Coast bank, Signature Bank failed. Credit Suisse teetered over the failure edge before getting bailed out by the Suisse government. Credit Suisse continued to wobble this morning as new failure warning signs emerged. And First Republic received a lifeline from 11 of the largest banks in the country to shore up their balance sheet.
Last week we talked about how a bank fails after withdrawals that exceed the cash held at the bank force selling of investments at a loss. When those losses exceed the total value of deposits then the bank fails. We did find out over the weekend that the Federal Reserve provided a solution for those banks called the Bank Term Funding Program. With this program, the bank may pledge assets to the Federal Reserve at par value in exchange for $200 of cash borrowed. That term “par value” is key because it allows the bank to receive full face value of cash for an investment that might be trading at a loss. So the investments might have a market value of $180 but can receive the full $200 of face value to cover the $200 withdrawal. Eventually, the bank will have to pay back the Fed to get their assets back but this does prevent selling assets at a loss and temporarily keeps the bank from failing.
After the rollout of this program, US banks have borrowed $11.9 billion from the bank term funding program and a further $153 billion from a similar, existing program called the Federal Reserve Discount Window.
Which means the Federal Reserve Balance Sheet, which has spent the last year reducing the size of said balance sheet by about $614 billion. In the last week, thanks to these two programs, the Fed balance sheet is back up another $297 billion. This probably means that interest rates will not be increased at the next Fed meeting because Mr. Powell finally broke something.
For more information on this topic or a variety of other topics including market updates, financial planning, and wealth management please visit our vlog at signaturewmg.com/vlog. If you like our content, feel free to share it with friends and family. And don’t forget to smash that subscribe button!
1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved March 17, 2023, from FactSet Database.
2.FactSet Research Systems. (n.d.). US Federal Reserve Balance Sheet (Interactive Charts). Retrieved March 17, 2023, from FactSet Database.
Signature Wealth Management Group is registered as an investment adviser with the SEC. Signature Wealth only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.
Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.
Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. The use of words such as “will”, “may”, “could”, “should”, and “would”, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.
Information is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.
The S&P U.S. Style Indices measure the performance of U.S. equities fully or partially categorized as either growth or value stocks, as determined by Style Scores for each security. The Style series is weighted by float-adjusted market capitalization (FMC), and the Pure Style index series is weighted by Style Score subject to the rules described in Index Construction.
All information presented prior to an index’s Launch Date is hypothetical (back-tested), not actual performance. The Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices LLC maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Please refer to the methodology paper for the Index, available at www.spdji.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations.