In this video, Vincent Mortier, Group Chief Investment Officer; Ken Taubes, Chief Investment Officer, US; and Paresh Upadhyaya, Director of Fixed Income and Currency Strategies, US, and Portfolio Manager, discuss the US Federal Reserve’s March rate decision and broader issues in the banking system and economy.
In this video, Lisa Jones, CEO of Amundi US, discusses with Ken Taubes, CIO of Amundi US, the economic implications of the Silicon Valley Bank collapse, the response of the US Federal Reserve, and the possibility of a hard economic landing ahead.
Keep checking back for our latest news and updates on Silicon Valley Bank
Despite the failure of a handful of banks in the US and one in Europe, our view is that 2023 will not present a financial crisis in the magnitude of the Global Financial Crisis (GFC) of 2008. Furthermore, we believe now is an opportunity to take advantage of the volatility in the banking space by increasing allocations to the banks that we believe to be structural winners—those that have invested in technology or have enviable deposit dynamics.
Fed Chair Jerome Powell's comments confirmed the Fed is very likely close to the peak in its rate cycle, but he clearly did not endorse the rate cuts currently priced into the market. He struck a balanced tone between maintaining financial stability and stressing the Fed's ongoing fight against inflation. He noted that while the Fed did consider a policy pause, recent stability in financial conditions appeared to have tipped the scales in favor of a hike, and he reiterated that the Fed has the tools to address financial stability risks. Overall, he worked hard to alleviate concerns about the safety of deposits, stating the banking system is safe, and well capitalized.
In the US, the credit crunch, which is already starting to materialize, will impact growth and will determine how pronounced the recession will be. Amid a weaker economic outlook, the market is reassessing central banks' actions. European banks' earnings growth will still be positive, just less so than previously thought. Concerns about credit crunches in Europe appear excessive amid the strong liquidity profile and capital position of European banks. While we already started the year with a cautious stance in risky assets, we have become increasingly prudent in credit high yield. We have also become more constructive on US duration, as it has started to work again as a diversifier of risk in periods of turmoil.
Important Information
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US). Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.
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