UBS takes over Credit Suisse (19.03.2023), after SVB and SBNY broke down in the US (10.3.2023 and 12.03.2023). The banking sector looks weak in the short term, but the governments will not let the sector go down. While the banking sector seems like a possible good midterm play for investors, as the valuations came down, the more important question as a trader is what will markets do in that situation and how will that affect the global economy. Which leads us directly to point 2):
2) FED interest rate descision
Wednesday, 22.03.2023, While the interest rate increase of 0,25 points was expected, and seen as a sign of the FED having finished the aggressive increases, the press conference afterwards was unpleasant. FED chairman Powell stated that the phantasy of rate decreases starting in 2023 is not realistic. The inflation, although lower, is still too high and far away from the FEDs 2% target. Therefor Powell kept all options on the table, and at the same time experessed his opinion that a „soft landing“ (which means price pressures easing without a painful recession) might still be possible, despite the credit crunch private and corporate lending could face in the near term.
3) Inflation rates
Worldwide Inflation rates are still too high everywhere, so surprises to the upside will probably lead to markets moving down, as market participants seem to fear the FED and the ECB have to increase the interest rates even more. This all while the probability of a real recession increases, due to the problems that the banking sector faces.
4) Chinas economy growing
China is back on the growth path, after it reopened the country and lifted the CoVid restrictions, although it needs to be seen how this unfolds in the future – China is responsible for a big chunk of the world economy’s growth, but faces several problems like aging population, shortage of labour especially in the manufacturing sector, and much more.
5) Geopolitical Situation
Rising tensions between China and the US, Chinas new won influence in the Middle East,… we experience a change in the geopolitical situation, the forming of new and strengthening of old new alliances and this will lead to disruptions and changes in international trade. So far the political situation did not severe global trade (apart from direct sanctions), but it will one day, should these developments continue.
