The recent news related to three specific, regional bank situations in the US and one in Europe has triggered some market volatility and potentially worrisome headlines. Governments and central bankers have since stepped in strongly to provide general assurances liquidity and backstops for deposits and longer-term ownership solutions are in progress. Market conditions appear to have stabilized over the past couple of days as a result.
Here are a few observations from Cumberland Private Wealth at this point in time:
- We have no exposure to US banks within our core strategies and portfolios. We have very limited exposure to European Banks and other international financial institutions in our International and Global strategies. Canadian banks are not structured in the same way as the impacted banks, our Canadian banking system has tighter regulations and is currently not significantly affected by the issues going on in the US or internationally.
- Central banks in the US, Canada and Europe have for the past year been balancing relatively strong economies while tempering elevated inflation on the one hand against recent signs of slowing inflation. Recently, the Bank of Canada sent a signal to the market that it has finished its interest rate tightening cycle for now. Today’s decision by the US Federal Reserve to raise interest rates by +0.25% (vs.+0.50% potentially targeted) is an attempt to continue along this path, but signals caution in its continued efforts to dampen inflation.
- The bank liquidity issues in the US and Switzerland have raised short-term expectations for a possible recession, however, there are many factors at play that will need to unfold in the coming weeks for us to properly assess this additional market impact on global economies.
- Our investment team is closely monitoring the situation overall while continuing to manage your investment portfolios in a manner consistent with our process.
This article was provided by Cumberland Private Wealth, March 23, 2023