We no longer support this browser. Using a supported browser will provide a better experience.

Please update your browser.

Close browser message


Bank stocks and rate hikes trouble markets

Markets are bracing for rough weather amid rate-hike worries and instability in financial stocks. Investors should consider focusing on quality—but stay the course.

Our Top Market Takeaways for March 10, 2023

Market update: On edge

Are storm clouds brewing? A bank stock blowup and word of more Fed rate hikes prompted market turmoil this week. Heading into Friday, the S&P 500 has lost over -3% (on track for the worst week since December), and bond yields have swung wildly—both 2-year and 10-year Treasury yields have whipsawed some 30-40bps.

So what happened?

1) Banks had their worst day in almost three years yesterday, erasing all of their 2023 gains. The moves are hard to overlook given banks are often seen as a barometer for the wider economy.

The Fed’s regime of higher rates is dialing up the pressure, especially on smaller regional banks that tend to be less diversified. For months, once high-flying parts of the market that relied on easy money, like crypto, venture capital and start-ups, and commercial real estate, have been under the hammer. Now, that weakness is reverberating through the banks most exposed to them.

Silicon Valley Bank, lender to tech start-ups and other VCs, saw its worst day ever as it announced its clients were withdrawing deposits. This prompted the bank to sell hoards of securities at a loss to improve its liquidity. And as of today, the FDIC has taken over receivership. Meanwhile, crypto-focused bank Silvergate Capital said it’s shutting down after weeks of turmoil (in large part due to outsized exposure to beleaguered FTX). And Cleveland-based Keycorp said it anticipates less net interest income as it faces tougher competition to offer attractive deposit rates.

Here’s the problem: With interest rates higher, banks are under pressure to up the ante on deposits (i.e., pay more) to keep savers in the door—if they can’t hack it, they risk their customers going elsewhere. Similarly, if times turn hard, clients might start burning through their cash too quickly, wearing down banks’ deposit base. In turn, panic about a downturn might also prompt others to yank their deposits, risking a bank run. That puts pressure on banks’ balance sheets, as securities invested when rates were low may need to be sold at a loss in order to buffer liquidity. Adding fuel to fire, the higher rates go, the less likely businesses and consumers are to make new loans (and generate new business for banks).

All that said, the pain has been mostly felt by smaller regional banks given their deposit bases have been quicker to flight, and their balance sheets tend to be riskier relative to larger banks.

Here’s the good news: Many of the larger, money center banks are far more diversified, more regulated and have fortress balance sheets – and thus aren’t feeling these stresses as acutely. This has left the banking sector as a whole much better capitalized today than it was during the Global Financial Crisis.

But, this does underscore the impact that tighter policy can have. As interest rates rise, it becomes more difficult to borrow, invest and spend. The Fed’s next move is in acute focus, which stresses the importance of today’s U.S. jobs report (and next week’s CPI print). This brings us to the following point.

2) The Fed may keep rates higher for longer—but it all depends on just how strong the economy stays.

At his testimony on Capitol Hill this week, Chair Powell doubled down on the Fed’s commitment to cooling inflation, signaling that central bankers could take policy rates higher still and ramp up the pace of hikes—but it all depends on the data. On one hand, growth is still strong, and inflation is still sticky, which could prompt a 50bps move at this month’s meeting (following their step down to 25bps in the last few meetings). But on the other, there were promising signs in today’s jobs report that suggest upping the pace might not be needed after all.

Today’s jobs report showed that the U.S. economy added another 311,000 jobs (following January’s blockbuster 504,000), in a sign that the economy is still strong. But, the Fed did get a few encouraging signs that it’s getting closer to getting its job done—the unemployment rate rose from 3.6% (from 3.4%) and wage growth was cooler than expected (at 4.6% year-over-year). While still a mixed reading overall, it may go to take some of the edge off.

The jury is still out on the Fed’s next move at its March meeting, but the more it has to hike, the greater the potential hit to the economy—and the greater the risk of recession.

Where to go from here:

So far this year, markets have quickly flitted between soft, no, and hard landing. Late cycle comes with transitions, and defensive positioning and diversification have historically been a good defense.

Bonds can provide crucial protection. The swift move lower in yields yesterday reminds us of the shield bonds can provide as the growth outlook worsens. We continue to focus on high quality, investment grade credit. And while banks overall make up roughly 25% of the U.S. investment grade market, regional domestic banks account for just 1.5% of the universe.

Further, this is why we’ve been focused on parts of the equity market that are more defensive in nature, backed by more secular growth, and/or that can offer better relative value—for instance, healthcare and industrials rather than financials in the U.S., as well as Europe and China. Strategies like structured notes can also offer downside protection and help to protect gains.

Above all, stick with your investment plan. While markets can always have a bad day, week, month, or even year, history suggests investors are less likely to suffer losses over longer periods – especially in a diversified portfolio.

Your J.P. Morgan team is here to help.



All market and economic data as of March 10, 2023 and sourced from Bloomberg and FactSet unless otherwise stated.

The Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Bloomberg Eco Surprise Index shows the degree to which economic analysts under- or over-estimate the trends in the business cycle. The surprise element is defined as the percentage difference between analyst forecasts and the published value of economic data releases.

The NASDAQ 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.

Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment and reinvestment risk.  Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss.

The price of equity securities may rise or fall due to the changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Equity securities are subject to 'stock market risk' meaning that stock prices in general may decline over short or extended periods of time.

Structured products involve derivatives and risks that may not be suitable for all investors. The most common risks include, but are not limited to, risk of adverse or unanticipated market developments, issuer credit quality risk, risk of lack of uniform standard pricing, risk of adverse events involving any underlying reference obligations, risk of high volatility, risk of illiquidity/little to no secondary market, and conflicts of interest. Before investing in a structured product, investors should review the accompanying offering document, prospectus or prospectus supplement to understand the actual terms and key risks associated with the each individual structured product. Any payments on a structured product are subject to the credit risk of the issuer and/or guarantor. Investors may lose their entire investment, i.e., incur an unlimited loss. The risks listed above are not complete. For a more comprehensive list of the risks involved with this particular product, please speak to your J.P. Morgan team.

We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.


  • Past performance is not indicative of future results. You may not invest directly in an index.
  • The prices and rates of return are indicative, as they may vary over time based on market conditions.
  • Additional risk considerations exist for all strategies.
  • The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service.
  • Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.



All companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context.

Bonds are subject to interest rate risk, credit and default risk of the issuer. Bond prices generally fall when interest rates rise.​ Investing in fixed income products is subject to certain risks, including interest rate, credit, inflation, call, prepayment and reinvestment risk. Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss.


Check the background of Our Firm and Investment Professionals on FINRA's BrokerCheck

To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our  J.P. Morgan Securities LLC Form CRS and  Guide to Investment Services and Brokerage Products.

This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation. 

This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.


Equal Housing Opportunity logo

J.P. Morgan Chase Bank N.A., Member FDIC Not a commitment to lend. All extensions of credit are subject to credit approval 

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment advisor, member FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Please read additional Important Information in conjunction with these pages.