Market Radar 27. March 2023

Is Asia now running away from Europe, while the S&P 500 is crawling sideways?

Since mid-August 2022, the ETF on the S&P 500 (SPY) has been moving in a sideways range between 420 and 360 US dollars. Last Friday, it closed at $395.75, slightly above the middle of this range.

Since the medium-term trend in the S&P 500 is neither long nor short, but sideways, long-term to medium-term oriented investors should perhaps imitate the stillholders: earn money by passing time and price thresholds are not exceeded or undercut.

In addition to day traders, stillholders can probably boast the highest returns achieved for the past seven months.

After the turmoil we’ve seen in the banking sector since March 9, it’s a bit surprising that the long-term picture of the S&P 500 has “crept” into such a volatile but actually lethargic forward movement.

Three bank failures after bank runs: Can it get worse?
If three bank failures in such a short time did not cause the S&P 500 to crash downwards, then many stock market participants are now wondering which horror scenarios could develop stronger crash potentials than the fears of bank failures and bank runs. More is not really possible, right?

Since a bank failure follows a bank run and not the other way around, the Fed under Jerome Powell and the US Finance Ministry under Janet Yellen now know exactly when and where to intervene. Both have communicated this clearly in the past trading week: “Our interventions were necessary to protect the broad US banking system,” Yellen said in a speech to the American Bankers Association in Washington. At the same time, the US Treasury Secretary and former US Federal Reserve Chairman promised further support and stressed that the government would take focused measures if necessary to prevent a run on current deposits to withdraw customer funds.

So are there more opportunities up than down at the index level because the worst is behind us?
An intensification of risks for the banking sector cannot be ruled out. Nowadays, normal bank customers without financial knowledge can quickly find out via the Internet that money market funds and even brokers pay more interest on deposits than traditional credit institutions such as regional banks or savings banks. However, this only leads to outflows, not to a bank run.

A possible collapse of individual REITs Stocks that have not diversified their business enough towards office and commercial real estate are probably attributed more individual risk than wildfire risk. I had reported about it in the market radar of March 23, 2023. The S&P 500 should probably hardly be disturbed by this “bogeyman”.