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Quick shot: Zoom out: Bank angst, broad resilience.

Since the first warning sign of banking sector turmoil on March 9th, the broad market has held up surprisingly well.

The S&P 500 is still up +3% year-to-date, with performance of tech-type companies (NASDAQ-100 +16%) buoying the index despite the anchor weight of poor performances in the financial sector (-13%). 

The market seems to be telling us that the damage so far is contained within bank stocks specifically. It’s worth noting the dispersion within financials themselves: regional bank stocks are down -27%, whereas large bank stocks are down a lesser -10%. Small banks’ issues are muddying the waters for the sector more broadly, but bigger banks are expected to be able to better navigate the storm. 

Still, the situation warrants close monitoring. If the issues metastasize to other banks, the consequences could pose risks to all corners of the economy. 

Either way, we expect the aftershocks of the recent bank failures to impact growth and raise (already elevated) probabilities of recession later this year. Consensus has been anticipating that recession for a while now, so we do not necessarily think markets are due for another big correction from here. 

Still, it’s worth revisiting your plan and kicking the tires on your portfolio. Does your positioning align with your time horizon and ability to take risk? Are you appropriately diversified, or are your exposures concentrated in similar regions, sectors, and companies? 


Bank stocks have underperformed the market this year

All market data from Bloomberg Finance L.P., 3/24/23


All market and economic data as of March 24, 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.

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