Flight to Money Funds Is Adding to the Strains on Small Banks Silicon Valley Bank’s collapse has caused savers to seek out alternatives, but the shift poses risks to the financial system and the wider economy.
(Bloomberg) — A risk-on mood fueling this year’s equities rally is likely to falter, with headwinds from bank turbulence, an oil shock and slowing growth poised to send stocks back toward their 2022 lows, according to JPMorgan strategist Marko Kolanovic.
“The Fed indicated no intention to cut interest rates this year, yet risk assets are exhibiting an unprecedented rally, with European stocks trading near all-time highs and US stocks recovering recent losses,” Kolanovic wrote in a note to clients Monday. “We expect a reversal in risk sentiment and the market retesting last year’s low over the coming months.”
In his view, the inflows into stocks over the past few weeks “make little sense” and were largely driven by systematic investors, a short squeeze and a decline in the Cboe Volatility Index, or VIX.
I’m going to go on a limb that she did not read the latest H.8, which showed $126B in deposits taken out – a 25% increase since SVB failure.
Federal reserve’s weekly report on all commercial banks assets and liabilities
You can find it here:
Over 50 years, only 20 quarters had negative deposit flow i.e. ~10% of quarters.
Four of those quarters were March ’22 – March ’23.
All prior year outflows sum to $190 billion.
This past year equals $765 billion aka. 4x all of history.
$ change, monthly: pic.twitter.com/qT7uJrPYil
— Mac10 (@SuburbanDrone) April 4, 2023
Jamie Dimon says banking crisis not over.
— unusual_whales (@unusual_whales) April 4, 2023
Fed’s balance sheet rose by $370B in March pic.twitter.com/IeF6R7BTNs
— Cheddar Flow (@CheddarFlow) April 3, 2023
The question is not when there will be a credit crunch, but how large and for how long.
Here’s everything the Fed has done wrong in handling the economy and why its reputation is in tatters, according to Mohamed El-Erian