Need to Know: SVB’s rescue means the Fed won’t hike rates in March, says Goldman Sachs

by | Mar 13, 2023 | Stock Market

After a frantic regulators-to-the-rescue weekend that sparked a rally for U.S. equity futures on Sunday night, the atmosphere has turned more cautious, except for still-partying tech futures. That’s as lots of banks are in the red ahead of Monday’s open. Nervous investors may be wary of more shoes dropping following the Silicon Valley Bank fallout that is resurfacing great financial crisis memories for some more long-toothed traders. And no rest for the wicked as the next update on consumer prices hits Tuesday.

Read: SVB collapse means look out for more stock-market volatility, say analysts. Here’s Jim Reid and a team of strategists at Deutsche Bank, neatly summing up a whirlwind few days: “SVB’s woes are a combination of one of the largest hiking cycles in history, one of the most inverted curves in history, one of the biggest bubbles in tech in history bursting, and the runaway growth of private capital. The one missing ingredient not involved here is a U.S. recession.” It’s just more of the boom-bust cycle we’re stuck in, says Reid. “That being… too much stimulus -> very high inflation and an asset bubble -> aggressive central bank hikes -> inverted curves -> tighter lending standards/accidents -> recession.” Onto our call of the day from Goldman Sachs, where economists say the rescue of SVB and other depositors will tie the Fed’s hands next week. “In light of recent stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path …

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