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The recent swoon in the market could be attributed to confusion and uncertainty around the United States’ new tariff and trade policy. The Trump administration has announced a flurry of current and potential future tariffs, that are changing and evolving almost daily, making it difficult for investors to adequately understand the goals, the economic impacts, and the potential unintended consequences. As such, the market has traded down on general uncertainty about our overall trade policy. Tariffs were a campaign promise to rectify certain inequities among our trading partners. As expected, shortly after the inauguration, the new administration announced tariffs on three of our largest trading partners. These tariffs were presented as a way to pressure Canada, Mexico, and China to assist with curtailing our immigration and fentanyl problems. Some tariffs were imposed, some changed, some delayed, and some are still being negotiated. The lack of clarity has caused confusion as...
04.05.2023
Following the collapse of Silicon Valley Bank and Signature Bank, banking regulators appeared on Capitol Hill last week. Fed Vice Chair for Supervision Barr and FDIC Chair Gruenberg testified before the Senate Banking and House Financial Services Committees about the recent bank failures. The Federal Deposit Insurance Corporation estimates it will cost $22.5 billion to backstop both Silicon Valley Bank and Signature Bank, guaranteeing all deposits. After the initial shock of these bank failures and the heightened sensitivity around bank holdings, the market rapidly adjusted to the new risks with the quickest monetary tightening in 44 years. Still, banks face several headwinds. First, the yield curve remains inverted—longer-term interest rates are lower than short-term rates. For example, the 10-year Treasury is yielding 3.38%, while the Fed Funds rate is 5%. This inversion is the largest in 42 years. It is generally viewed as a bearish signal for the economy,...
