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Why the implosion of Silicon Valley Bank is actually a good thing for stocks

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  • The implosion of SVB makes for scary headlines, but it could actually be great for the stock market.
  • That’s because the event could trigger a reversal of the primary cause of the stock market’s pain in 2022: rate hikes.
  • Interest rates plunged on Monday, and expectations are growing that the Fed will pause its aggressive hikes. 

The implosions of Silicon Valley Bank, Silvergate Capital, and Signature Bank in recent days might make for scary headlines. But they could actually be bullish developments for stock investors.

That’s because the Federal Reserve may be forced to slow the pace of rate hikes it’s been enacting since March 2022. It would be welcome news for investors who have felt the pain of tighter financial conditions as stocks have limped to a weak start this year.

It would also help alleviate the very pressure that led to the collapse of these institutions. After all, the rising-interest-rate environment is what put the firms in such a precarious situation to begin with, as risk-free government bonds started yielding more than their debt. Customers pulled money and fled to greener pastures, and the panicked situation eventually snowballed into a series of bank runs.

 

 

READ FULL ARTICLE HERE… (markets.businessinsider.com)

 

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