Another Bank Seizure While Markets Yawn

May 1, 2023

 

First Republic Bank was seized by the Fed and taken over by JP Morgan this past weekend.

 

JP Morgan CEO Jamie Dimon made a statement stating, “this part of the cycle is behind us.” While Dimon’s remarks were meant to sooth, and the market is up today, it is hard to understand what these comforting words mean precisely. What is behind us? Banks being seized by the Fed? JP Morgan acquiring a failed bank? It’s quite murky. Nonetheless, markets are moving on to digesting the news of the week and stocks are moving higher.

 

Over 3,000 public traded companies will report this week. As such, this is a massive week at the end of which we will have a much clearer picture of the going forward expectations for corporate earnings. We are amid a period of earnings deceleration for sure. What is not clear is whether this slowdown will lead to a full-blown economic recession.

 

While there are some long standing indicators flashing a recessionary alarm (chief among them the yield curve), this has yet to materialize. Annualized GDP for the quarter came in at a tepid 1.1% but was still positive. Thus, the potential for a “soft landing” in response to the Fed’s interest rate campaign is still a possibility. As such, we are still in a trading range on stock prices with no clear idea about any trends. Its all “up in the air.”

 

This backdrop of heightened uncertainty requires “steady hands on the tiller” when it comes to investment management. This is no time for quick moves and moving large sums. Rather the strategy of taking things day-by-day and making small moves is fitting at most times, but more so today than at anytime in recent memory. The tried-and-true components of modern portfolio theory that involve broad diversification and holding for the long term are more important than ever.

 

We at WealthPlan are firmly in the modern portfolio theory camp on this one. As a wise old friend once said of diversification strategies: “diversification is admitting your ignorance and prospering.”  We at WealthPlan accept this state of ambiguity and seek to prudently manage assets (i.e., no big moves) as we wait for a clearer picture to emerge. In the meantime, we hold a little bit of a lot of things in our portfolios, which is the right approach to heightened uncertainty. We thank you for your business.

 

=====================================================================================

Advisory services offered through WealthPlan Group, a DBA for WealthPlan Investment Management, a subsidiary Registered Investment Advisor of WealthPlan Group, LLC.  WealthPlan Group, LLC is not a registered investment advisor, but is the holding company for WealthPlan Partners LLC and WealthPlan Investment Management, LLC.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Investment(s) may be appropriate for you, consult your financial advisor prior to investing. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.

 

No investment strategy can assure success or completely protect against loss, given the volatility of all securities markets. Statements of forecast and trends are for informational purposes and are not guaranteed to occur in the future. All performance referenced is historical and is no guarantee of future results. Securities investing involves risk, including loss of principal. An investor cannot invest directly in an index.

 

The information in this communication applies solely to the intended audience and in no way amends, revokes, or otherwise alters the existing agreements and relationships between WPIM and its clients.  This communication is not a binding offer, expressed or implied.  WPIM undertakes no obligation to update or revise the information herein or in any referenced third-party resource due to new information, future events or circumstances, or otherwise.

 

WealthPlan Investment Management (“WPIM”) uses data compiled and/or prepared by third parties (“Third Party Data”) in the delivery of Licensed Research and Data. Third Party Data is not owned by WPIM and user may be required to obtain permission directly from third parties for further use of Third-Party Data and may be required to pay a fee depending on the use contemplated by the user.