First Republic Bank is trying to save itself

A general view of First Republic Bank in Century City on March 17, 2023 in Century City, California.

AaronP/Bauer-Griffin | GC Images | Good pictures

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The planned acquisition of Credit Suisse by UPS calmed the market a bit. However, broader market conditions are still seen as volatile.

  • US markets staged a relief rally as all major indices posted small gains on Monday. Asia-Pacific markets also rose on Tuesday. South Korea’s Kospi added 0.42% as the country’s producer price index for February rose 4.8% year-on-year, a smaller decline from the previous month.
  • Japanese Prime Minister Fumio Kishida is visiting Ukraine for talks with Ukrainian President Volodymyr Zelensky, Japan’s Ministry of Foreign Affairs. Confident. Kishida’s unexpected visit coincides with an official state visit by Chinese President Xi Jinping to Ukraine’s arch-rival Russia and its leader, Vladimir Putin.

A “Minsky moment,” named after economist Hyman Minsky, is a sudden market collapse brought on by easy money after a long period of aggressive speculation. Marko Kolanovic, chief market strategist and co-head of global research at JPMorgan Chase, warned that markets could soon face a Minsky moment.

Markets didn’t crash. Some bank stocks are in the doldrums, yes, but the SPDR S&P Regional Bank ETF, a fund of regional bank stocks, rose 1.11% on Monday. Major indices rose yesterday as well. The Dow Jones industrial average rose 1.2%, the S&P 500 rose 0.89% and the Nasdaq composite rose 0.39%.

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But there are signs of increasing market volatility. The banking crisis has caused regional banks — which account for about a third of all loans in the U.S. — to reduce their lending, said Eric Didton, president and managing director of The Wealth Alliance. In other words, even without the Federal Reserve raising interest rates, the flow of money into the economy is slow.

Talking about interest rates, analysts think the central bank has no good path forward. MKM Partners chief economist Michael Tarda told CNBC that an interest rate hike would be “misguided.” On the other hand, a pause could cause “panicked reactions by equity and bond investors,” says Nationwide’s Mark Hackett. That suggests markets are already too jittery that whatever the central bank does — even if it’s nothing — could cause instability.

With that in mind, investors may want to heed Kolanovic’s warning that a Minsky moment could be on the horizon.

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