Wild Week

Expect Some Spillover

Preface

Last week was ridiculous. Little did we know that Powell’s congressional testimony, though significant in itself, would be heavily overshadowed by something much darker. That was of course the Silicon Valley Bank saga. It’s still a developing story, and I’ve taken opportunity to put my initial takeaways into a thread:

For context, SVB was the 16th largest bank in the United States at the time of its default. This isn’t something that will just go away overnight. I do hope the US Federal Reserve will take this additional risk seriously when deciding how to proceed with its policy in the near future.

Come early this week, it’s expected that many tech companies will announce layoffs and closures due to no longer having access to their funds. According to multiple sources, about half of all venture capital-funded startups in the US (over 60,000) are customers of SVB. But while some are calling for a bailout, this is not a black and white situation.

See, the US Treasury and the Fed cannot just execute a bailout or force a bank merger on their own. Similar to 2008, either large bank(s) (or hedge funds) would have to come in and agree to acquire Silicon Valley Bank, or Congress would need to approve a taxpayer-funded bailout. If nothing is solved before Monday, further contagion and runs on susceptible banks aren’t out of the realm of possibility.

Here’s a thread on the potential impact.

Economic Calendar

Highlights

• Consumer Price Index – Tuesday
• Core Consumer Price Index – Tuesday
• Producer Price Index – Wednesday
• Retail Sales – Wednesday
• Michigan Consumer Sentiment Index – Friday

Breakdown

Consumer Price Index – Tuesday

The annual inflation rate in the US is expected to show a continued slowing to 6% in February from 6.4% in January and 6.5% in December. January’s print was the lowest since October of 2021.

Core Consumer Price Index – Tuesday

The core consumer price inflation rate in the US (which excludes volatile items such as food and energy) is expected to cool slightly to 5.5% from 5.6 percent year-on-year in January. This would be a fifth consecutive month of declines.

Producer Price Index – Wednesday

Producer prices for final demand in the US are expected to have decreased to 0.3% from an increase of 0.7% month-over-month in January. The upswing in January was the most in seven months.

Retail Sales – Wednesday

After an unexpected jumped of 3% month-over-month in January of 2023, Retail sales in the US are expected to have dropped to -0.3% in February.

Michigan Consumer Sentiment Index – Friday

The University of Michigan consumer sentiment saw an upward revision to 67 in February from an initial print of 66.4. Consensus for the March preliminary reading is a steady hold at 67.

Bitcoin Seasonality

Returning to our seasonal charts, there has been a tendency for price to bottom out in March before trending upward through May. This fits the traditional finance adage ‘Sell in May and go Away’. However, we only have 13 years of price history to back it up. That said, crypto tends to maintain a relatively close correlation with the stock market and I suspect this theme will solidify over time.

The Birb Nest Giveaway

There’s still time to toss your hat in the ring! Just follow the easy steps in the tweet and wait to see if you’re one of the big winners 🙂

Sponsors Corner

Our newsletter sponsor RoseonX is almost ready to launch their DeFi trading platform on Arbitrum and then we will be able to beta test it!

Details coming soon on the RoseonPass and associated airdrop.

Jay Charles

Editor in Chief, The Trading Tank.

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