A huge, brutal week-long market sell-off took place, involving almost every stock, with prices plunging to the extent it was the worst week for the stock market in over 10 months.
It began with the Fed chairman affirming the Fed has not done enough to tame inflation, such that higher interest rates for a longer period of time are now a given. That reality caused many amateur investors to exit stocks again.
It ended with the failure of Silicon Valley Bank (SVB), a potential “black swan” event that no one saw coming and surprised even the Treasury and the Fed. The failure will cause a ripple effect of damage for their investors, investors in other banking stocks, and for the many depositor companies whose cash is suddenly gone.
As of this writing, there is no update as to whether the FDIC has found a buyer or whether it will step in with deposit guarantees to calm the banking sector/stock market before the open on Monday.
Lacking that update, there is a wide array of speculation about next week – everything from a trading halt in the stock market, a banking closure to prevent a wider bank run, to a Fed deal to support the failed bank which could minimize damage and actually relieve investors to the point of a relief rally.
Our short positions were gainers, our long positions were losers. Much uncertainty at this point, but once again analytics are indicating institutional stock investors were NOT among the sellers on Friday nor will they be selling on Monday’s open – which could be a trap anyway if prices gap further down at the open only to recover later. Very unusual and challenging times indeed.
*UPDATE: Fed, Treasury, FDIC joint statement just announced all SVB depositors will be completely protected and all deposits available tomorrow. Stock market investor response may be positive.
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