Market Notebook

PRICE ACTION:
Equity prices, as measured by ticker SPY, closed lower on the week, while bond prices, as measured by ticker BND, closed higher on the week.

TECHNICAL ANALYSIS:
SPY’s price closed below key areas of technical support on Friday. 

BND’s price closed sharply higher on Friday.

SENTIMENT:
The break of established regimes appears due to the collapse of SIVB, SVB Financial Group, better known as Silicon Valley Bank. Rising interest rates, bank management’s failure to hedge interest rate risk, and a good old-fashioned bank run caused a liquidity crisis at SIVB. California regulators then pulled the plug. Regulators are moving to contain possible contagion within the U.S. banking system. Although there is a lot of noise in the media suggesting a wide range of problems, the most likely outcome is that regulators will adequately resolve this issue in short order. Last week’s price moves in equities and bonds appeared to be a reflection of the noise. Further volatility is likely until the noise dies down.

ECONOMY AND FUNDAMENTALS:
Economic indicators within the Market Notebook remain mixed but are skewing towards recession. Real economic activity will likely slow over the next few months as the Federal Reserve continues to act to contain inflationary pressures. Jobless claims are to be watched as a key indicator of recession.

NEXT WEEK:
Be prepared for potential volatility related to the Silicon Valley Bank failure and multiple economic data releases.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.