Investors should worry if the U.S. banking crisis stops the Fed’s predicted 25-basis-point hike next week, says “Big Short” investor Steve Eisman. If the Fed pauses its interest-rate hike campaign in light of the banking crisis, inflation will have the chance to flare up again. “If the Fed doesn’t raise rates… maybe it’ll be positive for a couple hours or a couple of weeks. But the Fed won’t be raising rates because it’s scared… If the Fed is scared, you should be scared,” Eisman warned. According to Bloomberg macro strategist Simon White, the current banking crisis will “turbo-charge the effects of [quantitative tightening], sealing the case for a U.S. recession.” To make matters worse, White believes that pausing the uphill battle against inflation will not even be enough to soothe the financial markets, as lingering concern around banks could have detrimental effects on the already-fragile economy.
Business Insider/George Glover
‘Big Short’ investor Steve Eisman says it’ll be bad news for stocks if the banking crisis causes the Fed to pause: ‘You should be scared’
Investors should start worrying if the US regional banking crisis forces the Federal Reserve to halt its interest-rate hiking campaign next week, Steve Eisman has warned.
The “Big Short” investor said Wednesday that it’d be a bad sign for markets if the central bank chooses not to raise the cost of borrowing – rather than bringing in the 25-basis-point hike that traders are expecting – next week.
“Fifty basis points is off the table,” Eisman told CNBC’s “Fast Money”. “So either they’re going to do 25 basis points or they’re going to do nothing.”
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ZeroHedge/Simon White
Bank Deposit Flight Seals Deal For US Recession
The collapse of SVB and the turmoil at Credit Suisse will turbo-charge the effects of QT, sealing the case for a US recession that remains underpriced by equity and credit markets.
Remember QT? To misquote Dirty Harry: in all this excitement, it’s easy to lose track of what’s going on. But quantitative tightening’s effects are now likely to accelerate as banking stress causes a steeper fall in bank reserves, tipping the economy into a potentially deep recession.
The Fed is therefore now more likely to end QT and the rate-hiking cycle early. It will not be enough, however, to save credit and equities, which are materially underpricing an economic slump.
You can read the full article, here.
Kitco News/Anna Golubova
‘Are dominoes starting to fall?’ BlackRock CEO Fink talks SVB fallout and cost of ‘easy money’
The fallout from the Silicon Valley Bank collapse is likely to get worse as the Federal Reserve’s aggressive pace of rate hikes exposed cracks in the financial system, said BlackRock CEO Laurence Fink.
“Bond markets were down 15% last year, but it still seemed, as they say in those old Western movies, ‘quiet, too quiet,'” Fink said in a letter published Wednesday. “Something else had to give as the fastest pace of rate hikes since the 1980s exposed cracks in the financial system.”
The chairman of the world’s largest asset manager said the U.S. banking sector remains at risk, noting that the Fed will keep raising rates as it keeps focus on sticky inflation, Fink wrote.
You can read the full article, here.
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