Is the Banking Crisis Over?Apr 03, 2023
Every Friday we host a live 1:1 discussion via discord at 12pm EST.
This gives you the opportunity to ask us any questions you have on the markets, the economy, crypto, and more!
If you want to listen to everything we broke down, just click the video above.
Here are the 4 key things we went over:
Will the Donald Trump indictment affect the markets?
Is the banking crisis really over?
Why certain stocks are acting like it's a bull market now
Why China and Russia will still affect inflation
And if you're too busy to listen to the entire recording, below we included a compact summary of what went down.
To get all the juicy details, just listen to the entire recording. And now, onto the summary👇
With Q1 finally over, it's easy now to say that the theme of the quarter was volatility.
After a December selloff gained ground in January, a minor bull run kicked off on the back of decent inflation news. This was followed by more uncertainty and then the market getting absolutely sandblasted by a mini-banking crisis that may or may not be over.
With the Nasdaq 100 technically entering a bull market as the quarter closes, a lot of investors are asking if the downturn of 2021/2022 is finally at an end with inflation peaking last summer.
And the honest answer here is nobody truly knows. The last week has provided a lot of mixed signals that give us roughly an equal amount of confidence and pause.
So let's look through the last week and find the most important details to go over.
Is The Banking Crisis Over?
Sure, with First Citizen's Bank buying out SVB at a discount, it sure looks like this little downturn may have concluded.
However, underlying structural issues still remain and any bank can still go down at any time.
While the Fed raising rates can be great for banks and their revenue, it can also allow for poor management choices to tank weaker balance sheets.
And that's true especially now as the market now looks to the commercial real estate industry. Sure, large companies have the leverage they need to get staff back into offices, but it's not nearly enough to make up for the incredible shortfall in commercial rents we're seeing.
There's some wiggle room for commercial investors to write down these investments, but it's still something we need to keep an eye on.
And that uncertainty is one of many potential risks still weighing on the market until we get a sense of when/if the Fed will stop raising rates this year. There is still a lot that remains to be seen.
Our Main Concern With Inflation:
But our main concern with inflation right now isn't even in America, it's worldwide.
One of the bigger themes we talked about in this podcast was concerns about a potential breakdown in the relationship between China and Russia.
It seems like a strange thing to worry about, but recent meetings between Xi and Putin can just as easily signal a breakdown between these partners as it could signal a strengthening of their alliance.
Regardless, the next potential driver of inflationary pressure is food production.
With two of the world's biggest exporters of wheat still at war with each other (and with really no end in sight there), we are worried about the next growing cycle and how that can drive up food prices worldwide.
Furthermore, with news that OPEC is cutting production again, we may be a few bad global decisions away from an inflationary cycle kicking right back off again.
Therefore, even though we have a lot of confidence about the winners and losers we have been picking for the past 6 months, we're still maintaining a defensive posture when it comes to our positions and strategies.
This could be overcautious, but it's better to be late to the bull run than early to the bear trap.
Wrapping this Up:
Q2 2023 is going to be all about strength in earnings.
We're pleased to see strength in luxury consumer discretionary brands like Nike and Lululemon. We're furthermore VERY excited that blue chip brands like Apple and Meta are making the cuts and optimizations necessary to be lean and mean for the next few years if necessary.
This economy is all about getting serious, and we're going to stay defensive for a little while as more encouraging signs keep materializing.
We'll keep you posted as more develops.