PUT IN WORK (3/13/2023)

It’s been a very interesting week in the market, with investors getting hammered with news all throughout. To start us off, markets fell dramatically throughout the week. The S&P 500 (SPY) was down 4.5%, and the Nasdaq (QQQ) ended down a slightly lesser 3.7%. When writing, futures are up significantly, with all indexes above 1%. The aforementioned fall occurred for several reasons, some of which we’ll cover in this issue.

In an interesting turn, an economic revision revealed that the payroll report for January wasn’t as it seemed. This Wednesday, we’ll get the revision for the retail report, which many believe will play out similarly to the payroll report. Essentially, the government reported exaggerated labor numbers for January, potentially due to changes applied to their 2023 seasonal adjustments. A seasonal adjustment is essentially a way for the government to remove or modify predictable seasonal patterns that would otherwise affect how employment and unemployment change monthly. To read more on that, click here.

In other news, as many have likely heard by now, Silicon Valley Bank (SIVB) took the internet by storm when they attempted to make a $2.5 billion secondary offering on Thursday. Essentially, SIVB’s reputation is this: a bank that primarily deals in tech startups. As we know, these tech startup companies have been having a hard time over these last several years and have recently needed more money. As interest rates increase and venture capitalists spend more money, they cut off these smaller, riskier companies; the companies thus lose funding in that regard. With few other options, these companies are forced to tap into their existing funds — Silicon Valley Bank, in this instance. As more and more of these startups and businesses required this kind of treatment, the bank became unable to keep up, eventually forced to sell safe bonds, in this case, at a loss. This behavior continued until the bank’s remaining assets and deposits were seized; this is known as a bank run. This news tanked the company’s stock price before trading under the company’s ticker was halted. Other financial stocks fell as a result of this news, and the greater market took notice. Regulators have since thankfully reported that depositors will get back all of their money, which be a catalyst for positive futures.

A noteworthy result of all these sudden realizations has come in the form of dropping market rates. We recently covered the news that the 10-year bond yield had risen to above 4%; right now, it’s sitting at approximately 3.7%, which isn’t an insignificant change. This information will likely push the Fed to maintain those small interest rate hikes, meaning their next meeting will likely result in a 0.25% hike rather than a 0.5% hike.

(Nasdaq ETF (QQQ) price from March 2022 - March 2023 — each candle is one week. Chart provided by tradingview.com.)

PORTFOLIO UPDATE

There haven’t been many deviations from the market in our portfolio over the last week. We don’t own any financial stocks and therefore haven’t seen any of those wild swings on well-established companies. We still plan to hold everything into the foreseeable future. As always, we thank you for reading, and happy investing.