Excerpt from The Wall Street Journal…
Stocks Fall, Treasurys Rally as Banking Fear Returns
Focus of investor worries shifts to European banks such as Credit Suisse
By Matt Wirz and Joe Wallace – Mar 15, 2023
Quoted: David R. Kotok
Fallout from the banking storm whipsawed stocks, bonds and commodities Wednesday as investors fled to the relative safety of the U.S. Treasury market. Credit Suisse led a rout in European banking shares and U.S. stocks before Swiss regulators offered to shore up the bank, stoking a rebound.
Selling that had been mostly contained to U.S. stocks is broadening on the risk that banking-sector turmoil could be what tips the U.S. economy into a recession that analysts have been predicting for over a year. The market’s obsession with inflation and whether the U.S. Federal Reserve would raise interest rates by a quarter-point or a half-point has been eclipsed by the new fear.
“It has all the signs of a panic in the stock market and it has all the signs of panic in the bond market,” said David Kotok, chief investment officer at Cumberland Advisors. If risk premiums start to surge in corporate and mortgage-bond markets, that will likely set off another leg of selling in stocks, he said.
Another worrisome sign Mr. Kotok is keeping an eye on, the ICE BofA MOVE Index—a measure of volatility in the bond market—surpassed levels recorded during the March 2020 market crash.
Efforts by U.S. officials and regulators to stop Silicon Valley Bank’s collapse from spilling over into the financial system appeared to have stabilized markets Tuesday. But the selloff in stocks and hunt for safe assets began again Wednesday, showing that investors remain on edge about the potential for tremors in the global banking system.
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