Broker Check

2906 Roosevelt Street
Carlsbad, CA 92008

Market Capital Management & Insurance Services

(760) 434-3575

 

Market Commentary 03-13-2023 from Market Capital Management

| March 15, 2023

Here we go again.  Swiss bank Credit Swiss is now in the headlines as markets fear the bank stability as their largest shareholder said they would not be investing any more money in the bank. This renewed fears on the overall banking sector.

In US Economic news the Producer Price Index was reported down .1%. This is versus expectations of an increase of .3%. In addition, retail sales were down .4%. Empire State Manufacturing was also lower.  These numbers, along with the banking issues, screams disinflation in my opinion. 
As a result, the markets have fallen and fear is driving the trading.  I have never been a big fan of trying to speculate on which way the fear or greed turns in the short term.  
The big question now is what will the Federal Reserve do next week at their meeting.  After the last meeting most people believed the Fed would raise rates another .25% at the meeting next week.  Then the Fed President made a speech which caused people to believe .5% increase was on the table.  Then Silicon Vallet Bank failed and markets went back to the .25% increase.  Today the talk is no increase.  The Fed is balancing several competing interests right now.  Inflation, Economy slowing, bank issues. When it rains it pours.
In my opinion I think the Fed will not raise rates next week but say they are ready to move if inflation accelerates.  
I have said this before but I want to repeat. I think the Fed's original mistake was keeping rates too low for too long.  That, coupled with the massive spending by the Government and the opening of the economy caused inflation which the Fed combatted too aggressively.  This caused problems for banks who were holding bonds which went down in value making some banks try to raise new funds, which caused a run on Silicon Valley Bank.
History has shown the Fed moves until they break something. I think they did on both inflation and now the economy.
At the end of the day the do tend to fix the mistakes.  I will be here to answer any questions.