The Week in Markets - The last rate hike has happened

In this episode of The Week in Markets, it's too early to say the rout in regional bank stocks is over, but the big deposit outflows seem to have stopped. Julius Baer financial company analyst Roger Degen has identified six regional banks with structural weaknesses, but none have assets in excess of $100 billion (Silicon Valley Bank had $209 billion in assets), and a proposed increase in the federal government guarantee of for business deposits appears to have calmed nerves. The Federal Reserve’s interest rate hike last week was probably the last of this cycle. Chairman Jerome Powell said that inflation probably isn’t going to come down quickly, so it would not be appropriate to cut rates.” Still, the economy is in remarkably good shape, and we think if there is a recession it will be only a small contraction over a couple of quarters. In that event, assuming inflation remains above 3%, S&P earnings growth would still be positive. Looking at the performance of the S&P after the last rate hike of rate of the previous ten rate hike cycles, in only two of them was the index down a year later, and the average return including them was 14%.

This episode is presented by Mark Matthews, Head Research Asia at Julius Baer.