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Investing.com – Morgan Stanley analyst Michael Wilson recommended that investors sell any recovery in US stocks that may result from regulators’ support measures after the Silicon Valley collapse.
“We suggest selling any bounce on government intervention to quell the immediate liquidity crunch in SVB, and other institutions until we achieve new market lows, at least,” Wilson wrote in a note on Monday.
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Federal effects
“The collapse of Silicon Valley and the closing of Signature Bank illustrate the impact of tightening,” said Mike Wilson, while he does not see a broader systemic problem similar to the one encountered during the 2008 global financial crisis, particularly with US authorities backing deposits at both banks. defaulters, but believes that the fall of these banks is likely to have a negative impact on economic growth, according to “Bloomberg” agency.
In the aftermath of the Silicon Valley collapse, First Republic Bank remained under pressure, with shares down 70% in pre-market US trade even after the bank moved to try to quell liquidity concerns following the SVB bankruptcy.
While Backwest Bancorp lost more than 40%, Western Alliance Bancorp fell 30%, Charles Schwab (NYSE:) fell about 20%, and Zion Bancorp NI fell 15%. Comerica Inc shares fell 7%.
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lower profits
Wilson of Morgan Stanley said he expects the trend of depositors to withdraw money from conventional banks and pile it into higher-yielding securities will continue, unless lenders raise interest rates on deposits. This, in turn, will lead to lower profits and potentially lower loan supply, he added.
“We view the events of the past week as merely a further support for our negative earnings growth outlook,” Wilson wrote.
“In short, the Fed’s policy is starting to pay off, and it is unlikely to reverse even if the Fed pauses its interest rate increases or quantitative tightening,” Michael added.
He predicted that banks will tighten the operations of providing credit, which will affect more companies with small capitals.
Biden’s remarks
US President Joe Biden said a short time ago that he directed to move quickly to contain the repercussions of the collapse of the “Silicon Valley” bank.
He pointed out that taxpayers will not bear the losses of banks, adding: “We will not allow the recurrence of bank failures, and we will work to protect emerging companies.”
In a speech about the repercussions of the collapse of the “Silicon Valley” bank, Biden added that depositors of the “Silicon Valley” bank can access their money without hindrance.
He made it clear that investors who risk American deposits will be held accountable and will not have any protection, saying: “We will hold those responsible for the banking crisis accountable, and no one is above the law.”
He revealed that the management of “Silicon Valley” and “Signature” banks will be dismissed, and they will be held accountable.
He continued, “I ask the Americans to trust the banking system, and I assure that their deposits are safe.”