Thinking Out Loud - What To Make Of The Market Going Forward?
To put it bluntly, the Fed f***ed around, and we all found out the ramifications.
I am certain all of you are aware of the current banking crisis that we are going through. Over the weekend, Signature Bank is now under the control of the Fed along with Silicon Valley Bank last week. Emergency measures were announced over the weekend to stem investors from panicking, but there's a bigger issue at hand.
Once a bank run happens, which is precisely what happened to Silicon Valley Bank, the market is rightfully so to be afraid of who's next on the chopping block. This is precisely why you are seeing many of the other regional banks get taken to the slaughterhouse.
In my view, there's no value I can add to you on this topic. I am not a banking expert, and I have no idea which banks will fell. So you are probably better off reading someone else's take on that. But what I can tell you is that because of this banking crisis or perceived banking crisis, the market is now starting to price in the possibility of a rate cut from the Fed.
Source: ZeroHedge
Source: Bloomberg, Joe Consorti
And looking at the table above, the March meeting probability of a hike is quickly diminishing, while the probability of additional rate cuts by mid-year is increasing.