The new Media narrative is that the failure of SVB might cause a run on the banking system. Of course, these are the same pundits that didn’t foresee SVB’s collapse, and until recently have been perpetrating FOMA. Just a few days ago, investing in unprofitable AI & ChapGPT were all the rage…a month ago, MEME stocks were hot again.
I don’t see SBV as a Black Swan event, any more than FTX was. These type of failures are not unexpected (a Black Swan), these type of failures were inevitable. The Fed is specifically tightening monetary policy to cause these type of events. I’ve described it as a “controlled burn of the economy”. So don’t think of failures like FTX, SI or SBV as a systemic problem. They’re part of the Fed’s intended systemic solution. And they’re likely not the only dominoes to fall.
To me, the more important issue is- is this another stock market failed rally?
Note the below chart, comparing last summer’s failed rally with today’s situation. If the lows of October 2022 are tested, then the S&P 500’s value would drop below its long term moving average (LTMA). That’s a danger zone that isn’t often breached…events like the DotCom Bubble, Financial Crisis & Pandemic come to mind.
My intent is not to promote fear…just the opposite. All those events proved to be EXCELLENT buying opportunities.
Keep your powder dry and stay tuned.
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