One of the popular market metrics we follow, the VIX (Volatility Index), moved higher this week as economic uncertainty and prolonged inflation and interest rate hikes dominated the news. The technology sector, already sitting on shaky ground over the last year, wavered even more as several banking entities tied to Silicon Valley warned of more cash burn issues by many of its clients. This has only added to the overall uncertainty being felt across the market spectrum. Silicon Valley Bank (SVB), a major bank for many venture capital backed technology companies, has seen a large outflow of deposits in recent weeks. This is being attributed to many of their “clients” facing cash burn issues as they navigate the current environment. This caused additional ripples throughout the banking industry with many other banks, large and small, seeing sell-offs over the week. Unfortunately for SVB, that adage or warning of having all your eggs in one basket has rung true (as of this afternoon, regulators have stepped in and shut down the bank). While other banking entities across the spectrum are being impacted right now, it is important to remember that this is only a small piece of a much bigger system. Secretary Yellen even provided some testimony today citing that they are monitoring the situation closely and acknowledge that this is likely contained to a few entities and not at all widespread. What I take away from all of this is that we are still walking on eggshells right now and that any significant news from an economic standpoint carries much weight.
Adding to the market angst over the week was Chairman Powell’s two days of congressional testimony. Fed Chairman Powell stated during his testimony this week that interest rates are “likely to be higher” than previously anticipated. While we don’t necessarily like this news, it does affirm our thoughts that we will remain in this current pattern for some time. Higher for longer is the new mantra. Friday’s payroll data also showed signs of solid growth. Nonfarm payrolls rose by 311,000 in February, above the 225,000 estimates by Dow Jones. Additionally, the unemployment rate increased to 3.6% vs. expectations of 3.4%. Though the jobs number was stronger than expected, February’s growth did represent a slight slowdown from an unusually high number in January. Leisure, hospitality, retail, and government sectors are where the newly created jobs came from. I suspect this data will keep the Fed on track for its’ expected 0.25% increase in base interest rates when they meet again on March 21-22. Chairman Powell specifically noted in his testimony this week that a tight labor market will likely be the main culprit for the continued rising rate environment. How long this current environment stays “elevated” is anyone’s guess in the near-term.
Our focus, for now, remains on sticking to our knitting and playing the long game. We are going to have weeks like this of uncertainty. Few things in our financial sphere seem clear right now and that is why we are seeing the volatility creep back in again. Compounding these issues are the constant bombardment of headlines and sensationalism by the media and news outlets. I have to remind myself often to stop and look around. Our surroundings tell us more of the real story than anything. How we spend our money, and our time, is more important today than ever. The reality is that we can only control so much when it comes to these bigger, macro issues. Quality, diversification, and time are on our side. History has and will always show us that. Hang in there, the ride is far from over. Buckle up and take in the sights!
Sunnier, longer days are ahead – don’t forget to change your clocks!
https://www.cnbc.com/2023/03/10/jobs-report-february-2023.html
Christopher E. Wasson, CFP®
President
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
MosaicAssetPartners.com
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.