Stocks threw on the brakes in Friday’s session to end the week. Investors continue to digest banking concerns and, of course, the Fed’s looming decision. Many expect a 25bps hike, while another side of the aisle calls for a pause.
While the Fed’s decision remains in focus, it’s worth checking in on the turmoil within banking, especially following the fallout of Silicon Valley Bank.
Now, Credit Suisse CS has become the center of attention following concerns regarding its stability.
And just on Sunday, it was revealed that Switzerland’s largest bank, UBS UBS, agreed to buy Credit Suisse. Valued at roughly $3.25 billion, the purchase price is a significant discount relative to the bank’s value last Friday after markets closed.
Needless to say, it’s a massive development, as it reflects an attempt to limit financial contagion amid a somewhat-cloudy economic outlook.
And in an extreme move, the deal won’t need shareholders’ approval following the Swiss government’s modification of the law.
However, many approve of the deal, including Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen, who made the following statement yesterday on March 19th –
“We welcome the announcements by the Swiss authorities today to support financial stability. The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient. We have been in close contact with our international counterparts to support their implementation.”
CS shares have been stuck in a nasty downtrend for years now, down more than 94% over the last five years and widely underperforming relative to the S&P 500. This is illustrated in the chart below.
Image Source: Zacks Investment Research
And over the last month, many of the big banks, including JPMorgan JPM, Goldman Sachs GS, Bank of America BAC, and Morgan Stanley MS, have also felt the drag, widely underperforming relative to the S&P 500 over the last month.
Image Source: Zacks Investment Research
With banking concerns and a looming Fed decision in focus, it’s reasonable to expect spikes of volatility throughout the trading week.
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