Weekly Market Update - 13 March 2023
Silicon Valley Bank
It’s a sigh of relief for Silicon Valley Bank customers, who will have access to all of their money from Monday, the Fed, Treasury Department and Federal Deposit Insurance Corp. said in a joint statement. The move comes after a frantic weekend that also saw the sudden closure of New York’s Signature Bank. Much like SVB, Signature had a deposit base that was mostly uninsured. Meanwhile, HSBC is set to buy SVB’s UK arm for £1. Depositors’ money is “safe and secure” as a result of the transaction, and no other banks in Britain are directly affected, according to the Bank of England.
Source: Bloomberg
Economists Changing Their Tone
Goldman Sachs economists no longer expect the Fed to deliver a rate increase next week, despite efforts by authorities to contain SVB’s fallout. Those measures should provide “substantial liquidity to banks facing deposit outflows’’ and “improve confidence among depositors,” Goldman’s Jan Hatzius wrote in a note. Still, he pulled his previous call for a quarter percentage point increase next week and said there’s “considerable uncertainty” about the path beyond then. Traders have shifted their own bets for the Fed’s rate decision due on March 22, and now see a quarter-point increase as more likely.
Source: Bloomberg
Biden Proposing New Tax Increases
President Biden is proposing a series of new tax increases on billionaires, rich investors and corporations in his budget request to Congress, slated to be released Thursday. The plan calls for a 25% minimum tax on billionaires and would nearly double the capital gains tax rate for investment to 39.6% from 20%, while raising income levies on corporations and wealthy Americans. While the proposal has little chance of passing Congress given the Republican-controlled House of Representatives, it foreshadows Democrats’ strategy ahead of debt ceiling and government spending negotiations later this year, as well as the economic platform underpinning an expected Biden reelection campaign.
Source: Bloomberg