Nick Pirsos, Wealth Advisor at MRA Advisory Group, published his updated view of equity markets. You are invited to schedule a complimentary first meeting (via the link below) to discuss his views in greater detail and to learn how to best optimize your portfolio to better attain your retirement goals.
Our title this month takes poetic license with Meghan Trainor’s pop hit song, as investor actions in March focused on the unsettling trends in the banking sector across the globe. Regulators seem to be stemming the immediate contagion of the financial crisis, a good thing, but at what long-term expense?
In the US, Silicon Valley Bank’s collapse (SVB), and the rippling impact on other larger-sized “regional” banks, most notably First Republic, is resulting in a regulatory re-think of the entire FDIC protection landscape. Time will tell if the $250,000 deposit guarantee will be maintained, raised, or again be randomly administered as regulators see fit. Raising the guarantee has multiple hurdles: First, congressional approval is required, never an easy task with divided government; Second does raising the limit help/exacerbate the safety issue? The limit concept is rooted in a preservation discipline and has been effective in most cases. The exceptions are typically driven by poor bank management, coupled with regulatory mis-oversight, as appears to be the case with SVB. Lastly, a full deposit guarantee at present would require in effect a nationalization of the US banking sector as the Federal Deposit Insurance Fund only maintains about 1% collateral versus the $18 trillion in bank deposits.
In Switzerland, the forced marriage of UBS and Credit Suisse required a re-interpretation of risks surrounding CoCo bonds. Undoubtedly, lawsuits will emerge and this security will need to re-incarnate with added investor protections going forward.
Despite these concerns, investors in most geographies bid equity valuations higher last month, led by the NASDAQ up 7.4%, owing in part to peak inflation expectations, coupled with Central Banking rescue efforts, which could evolve further in the near term effectively ending quantitative tightening.
Financial markets are predicated on a sound financial and banking system. Cracks in the system finally emerged last month following the fastest and most aggressive tightening of monetary conditions in history.
In past financial crises, the more reliant outcome has seen a near-term reversal of interest rates. Recessions and Bear Markets, on the other hand, unfolded only about 63% of the time.
We believe the US regulatory actions undertaken last month for the immediate moment were proper and effective but note the revised borrowing standards for US commercial banks from the Fed have a one-year shelf life. How regulators respond in shoring up matters more permanently will likely impact equity performance for the remainder of the year. In the short run, we believe investors will continue to enjoy the base case trading rally but caution “treble” can emerge at a moment’s notice.
Unsure how to position your portfolio in these volatile times – we are here to help.
ACTION PLAN: “How do you know when you have arrived, if you don’t know where you are going?”
Call us today and we can help you align and optimize your Savings and Retirement funds with your Lifestyle Plan to current and expected investment market conditions.
Specifically, we can assist you with these and other personal advisory services:
- Building consistent monthly investment income.
- Strategies to mitigate monthly equity volatility.
- Identifying your portfolio’s current and long-term expected risk/opportunity preferences.
- Capital gains tax optimization.
- Or any other personal Financial Planning and Retirement Savings needs including College Planning/529 Plans, Insurance (Life, Disability, Group Health), Wills and Estate Planning.
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Feel free to share our views with family or friends who are also confronted with these important life Wealth Planning decisions. MRA Advisory Group and I are ready to discuss all your investment concerns to best position your Retirement Goals.
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Advisory Services are offered through MRA Advisory Group, a Registered Investment Adviser. This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. The investments and strategies mentioned may not be suitable for all investors. Past performance is no guarantee of future results. Nothing herein, nor any attachment, shall be considered to constitute (i) an offer to sell, nor a solicitation of an offer to purchase, any security, or (ii) tax or legal advice.