The long-awaited correction in the market has been playing out as we near the end of August. So far as it’s played out, it appears to be just that- a correction. And not something deeper signaling another top in the market yet. Another push to new highs could be on the horizon, but historically the month of September can be tricky.
It’s hard to believe, but yes, we are already halfway through the year. We have seen quite the change in 6 months compared to where things were at the end of 2022. There are things about this market currently to get excited about, and things that signal caution. Both bulls and bears can present compelling arguments for why the market will go up or down from here, with many possibilities in between.
The week of April 24th saw many of the mega-cap stocks report earnings, with most of them posting impressive first quarter results that led to their stock prices moving higher. Microsoft, Alphabet (Google), and Meta (Facebook) all saw significant gains after their release of first quarter earnings
First, it was Silicon Valley Bank, now it’s San Francisco-based First Republic Bank taking a hit. Like Silicon Valley Bank, First Republic is another bank catering to “free-money” startups. First Republic’s shares are now down 86% from their peak in November of 2021.
The recent banking failures could be the beginning of what’s been called the most anticipated recession ever. A lack of confidence in the system can spread quickly. The fact that SVB failed in just a matter of hours was shocking and has never been seen before. The hope is the problem does not cascade to other banks and other parts of the economy.
The question everyone asked since last Thursday (3/9/23) has been “Why did Silicon Valley Bank go bust? And what does it mean for MY bank?” The best explanation is that Silicon Valley Bank (SIVB) was uniquely at risk because of its unusually low percent of individual depositors, and its unusually high portfolio of loans and securities backing up their deposits.