The Fed, FDIC, and Treasury acted quickly and effectively to prevent this from becoming a systemic bank insolvency contagion and a massive hit to the #startup #tech ecosystem due to #SiliconValleyBank's concentrated customer base.
The S&P 500 has reached a new all-time high, coming full circle in just two years, despite growing uncertainty around the economy, the path of Fed rate cuts, and rising interest rates. Outside of traditional asset classes, Bitcoin also recently reached its highest level in two years, following last year's run-up. This has been fueled by the broader rally in risk assets and the much-anticipated approval of Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC).
On August 1, Fitch, a credit ratings agency, downgraded the U.S. debt from AAA (the highest rating) to AA+. Fitch had warned of a possible downgrade during the debt ceiling crisis earlier this year and has sounded alarms since 2011, when a similar crisis occurred. While few investors, economists, and business leaders view the downgrade itself as meaningful, primarily because AA+ still represents an extremely low default risk, that does not mean it has not impacted financial markets. After all, investors have benefited from markets mostly moving upward this year, leaving some investors unprepared for even small stock market swings. What drove the downgrade of the U.S. debt, and how can long-term investors maintain a balanced perspective?
Market and economic expectations have shifted 180 degrees since the start of the year when many investors expected a recession and prolonged bear market. Ongoing economic growth, low unemployment, improving price pressures, and slowing Fed rate hikes have spurred a strong market rally, especially across sectors that struggled last year. While the economic situation is far from perfect, and investors should always be prepared for uncertainty, it's also essential to recognize the positive trends raising the odds of a "soft landing." What factors are driving these changes in investor expectations?
With several large bank failures in recent months, we are all reminded of the 2008 Great Financial Crisis and Recession, when millions lost their jobs, homes, and ways of life. While many factors contributed to this economic disaster, one term can cover nearly all of them: systemic risk. The financial system plays a crucial role in the global economy, facilitating the flow of funds, managing risk, and supporting economic growth. However, it is also vulnerable to systemic risk, which can have far-reaching consequences for the stability of financial markets and the broader economy. Let's look at what systemic risk is and how it can impact your behavior as an investor.
In times of market uncertainty, investors often turn to sayings such as "those who fail to learn from history are doomed to repeat it" and "history never repeats itself, but it does often rhyme." When it comes to the daily headlines, both quotes are relevant, given the long history of banking crises and market swings.
One year ago, the markets were hinged on the public health crisis as it spurred an economic crash, which in turn risked a credit crisis. Moving forward, the environment looks much different.
Congress has come to a much-anticipated agreement over stimulus package negotiations. With a new $900 billion act passed, what can Americans expect to see coming their way soon?
While Bitcoin continues to rally in popularity and price, how has COVID-19 affected it in 2020?
We've been told that there has been, and will be, a V-Shaped economic recovery. It is a theory that I had never bought into.