Banking failures have and will occur because of a dramatically inverted yield curve which has caused banks to realize losses in bond holdings. This has put some banks who have heavily invested in the bond market over the previous few years, realize the losses from a higher, but inverted rate curve.
If nothing changes, nothing changes.
This is the awkward phase of the cycle which historically seen the Central Banks raise rates until something ‘breaks’. Is this the ‘break’ that will cause central banks to pivot? It is too early to tell but the economy must clean house post covid economy which was heavily supported by Government subsidies and interventions in the economy. .
This instability is normal and is necessary.
This is an important part of the cycle must run its course, in order for markets to rise to new highs. Which it always has historically.
People are working hard on your behalf.
We and fund managers realigned portfolios months ago in anticipation of volatility while maintaining exposure to post recession growth. It is time in the market that matters, not timing the market.
Noise
GICs offer better returns.
With GICs paying 4%-5%, it seems attractive. Yields in the bond market have seen the yield to maturity now paying 5%-8% with the potential for additional capital gains.
Equities fall during a recession.
Actually Equities tend to fall most before the recession as the Stock Market is a predictive mechanism. Expect continued volatility, in both directions, for the remainder of 2023 as these imbalances are worked through the economy.
Something dramatic should be done to portfolios.
The repositioning of portfolios and funds has already been underway both by us with the addition of new strategies as well as fund managers realigning their funds for post recession growth. This is not the time to attempt timing the market.
