If you’re like us and you read a lot of news and economic commentary and equity research and bond market commentary and you thought really, really hard — that would definitely not have told you what was going to happen over the past year and a half!
If you didn’t know better, you’d think the US Treasury bond was sucking all the oxygen out of the room. A couple of banks have failed, in part because the US treasury pays more interest on short term notes than banks can afford to pay on deposits. Some banks have seen deposits move out very quickly and have gone from being (almost) adequately capitalized to Out of Business in the course of a few weeks.
This market continues to defy prognostication. For about 5 quarters now, the financial industry has been saying: no recession, nothing to see here! OR: OMG it’s an economic maelstrom!
Earlier in the week we sent you some perspective on the Silicon Valley Bank failure. This a follow up to that piece to speculate about the direction for interest rates and the economy, the odds we’ll see other bank failures and the prospects for the markets.
A lot of clients touched base to talk about the failure of Silicon Valley Bank. They had smart questions about what this means for their banks and for the financial system in general. I thought we could share some things from those discussions. You might have the same questions.
The economic situation in the US is far from dire. We have full employment, energy resources to tap, good credit, a reasonably good government, a strong military. In other words, we have the means of solving our problems.
here’s a look at the near term setup in the economy and markets as well as some historical perspective. The short term is challenging, but the longer term outlook is sound.
Take a moment to acknowledge that we’ve been through a lot. Covid, cultural and political turmoil, a land war in Europe? Life happens fast, and a lot of what happens isn’t under our control.
My family lives on a nice street in a pretty good neighborhood in Greenville. However, we had a house on our street slowing falling in. The neighbors wanted that eyesore torn down. I really got a kick out of how much it bothered everyone.
We know you haven’t enjoyed this year in the markets. But one good effect of bad markets is better pricing and better opportunity for future return. Bad markets are good for long term investing.
This is the most interesting bond market we’ve had in more than a decade. Here are the changes in treasury yields this year- and over the past decade.