What the Silicon Valley Bank failure means for investors


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Bad Moon Rising

Last week’s events surrounding Silicon Valley Bank & Signature Bank, just to name a couple, served as a painful reminder of how quickly things can change, particularly when fear ripples across markets. I’ve often used the analogy of a boulder rolling down a mountain. It begins slowly and takes a lot of effort to push, but once it picks up speed it’s nearly impossible to stop.

Despite a government backstop of deposits over the weekend, new headlines today surrounding European bank fears have shaken market confidence again. As such, a flight to safety and swift move in fed rate expectations sent U.S. yields tumbling. In just one week’s time, the 2-year Treasury yield fell 118 basis points (bps) and the 10-year fell 53 bps.

Silicon Valley Bank & Signature Bank

Moves of this magnitude do not find themselves on a list of “stable market conditions.”

That said, the interesting part about these moves in yields is that the increase in Treasury bond prices (which move in the opposite direction of yields) has actually helped reduce the unrealized losses on bank balance sheets. But I said reduce, not eliminate.

Earthquakes and Lightnin’

If you are a newer investor, or under the age of 35, the only crisis you’ve likely lived through as a market participant is the pandemic. But even for those of us who are less youthful, it’s been 14 years since we saw stress in the system that was caused by financial market forces.

None of us want to relive what happened in 2008-2009, and I don’t think we will. I’ll stop short of saying this time is different, because I’m of the opinion that financial market crises tend to resemble one another on a number of different levels. The catalyst to bring us into them is usually what’s different.

If a serious drawdown occurs this time, the catalyst is likely to have been an extremely fast tightening cycle that appears to now be working its way into the system. That’s different from the layers of counterparty risk and bad loans that caused the Global Financial Crisis, thus the compounding risk is not as high right now, in my view.

However, it’s been my stance that despite the “soft landing” possibility and optimism, I couldn’t imagine a world in which we raised policy rates by nearly 500 bps in 12 months and trotted off merrily into a new bull market.

The Volatility Index (VIX) was unnaturally low considering the environment, which coincided with stocks being unjustifiably high, in my opinion. The last few days have moved both, and the massive drop in Treasury yields has also moved the bond volatility index (MOVE Index).

Market Volatility

I recognize that this feels scary at the moment, and seeing a chart of volatility spikes can become a self-fulfilling prophecy where fear begets fear. I’m showing this to point out how nearly impossible it is to get ahead of a spike in vol once it starts. And how dangerous it can be to get greedy when valuations are high.

The good news about spikes in vol is that they don’t tend to last very long, but when tensions are high the minutes feel longer. And that’s when investor emotion gets stronger. The best thing investors can do right now is try not to let temporary emotions turn into permanent decisions. If you’ve put defensive positions in your portfolio, let them do their job. On big down days, most things go down, even the “safe” stuff. That doesn’t mean they’re broken over the medium-term.

Who’ll Stop the Rain

It’s not fun to be bearish, it’s even less fun to be criticized for it by those who are optimistic. But my job isn’t to please everyone, it’s to provide my intellectually honest view of the macro and market conditions.

The title of my 2023 outlook was, “This Ends One Way or Another,” and at the time I thought we’d see the end sooner rather than later. It’s taking longer than I expected, but what I was calling for was an end to the purgatory. In other words, the constant wondering of whether or not something would break, whether inflation would die of natural causes or a head-on collision, whether we’ve already seen the market lows of this cycle, and whether corporations could withstand tightening with a minimal hit to earnings.

Not all of these questions are answered, but I still think they will be before the year is over, and likely much sooner. Before then, the bigger looming question is what happens on March 22nd when the Fed gives us their next rate announcement. Will they pause in reaction to recent market stress or keep hiking because of inflationary pressure?

At the time of this writing, the market is undecided and fed fund futures show a 50/50 probability of hike/no hike. If the odds stay close to 50/50, the market move on the announcement is likely to be big. There is no such thing as “in line with expectations” when expectations are a coin toss.

Jerome Powell doesn’t call me for my opinion and I don’t get a vote, so take this with a grain of salt. But even if the Fed doesn’t hike next week, it’s not a sure thing that they’re done. A pause in hikes is likely to be paired with commentary that inflation is still a concern and they are going to wait a bit to determine if more instability is on the horizon before possibly hiking again.

If inflation is left undefeated, it poses more long-term danger to the economy in the form of stagflation, semi-permanent higher costs of capital, and recession risk that’s simply pushed out further. I don’t think the market will like a pause or a hike. That’s the rub.

Whether correctly or not, the Fed believes they have the tools to “save” us from stress induced by prior hikes. As uncomfortable as this last week has been, I don’t think it’s enough to assume they’re going to pump liquidity back into markets. In fact, I think a so-called “Fed put” (i.e., the idea of a rate cut or more quantitative easing) carries more risk than letting the market feel some pain. But again, I don’t get a vote. I just get to watch what happens live and give my best guess on what the market reaction could be. For now, my best guess is to value safety over heroism in your portfolio.

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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

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Should you be saving or investing right now? Here’s how to tell

Should you be saving or investing right now? Here’s how to tell

Many people use the terms saving and investing interchangeably because they go hand in hand to ensure financial stability. But saving and investing have many differences that you should know when planning for your financial future. In general, saving provides a safety net for unexpected expenses and short-term spending goals, while investing is a strategy to help build long-term wealth. Being aware of these differences can help you prepare the best financial foundation for yourself and your family.

Related: Money management and setting your financial goals

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The main difference between saving and investing is the amount of risk you are willing to take to reach financial goals.

When saving, you generally want a low-risk option to build and maintain wealth. Saving is when you gradually set aside funds — maybe a portion of your paycheck — in a safe place, like a savings account or money market account. These accounts allow you to store cash that can be easily accessible and have little risk of loss of value. Saving is often intended to reach shorter-term financial goals, like creating a fund for emergencies or saving a house down payment.

Investing is when you put money at risk to make more money. When investing, you may trade stocks, mutual funds, or other assets because there’s a potential for a return on the investment, but you are also at risk of losing the value of the investment. The goal of investing is to grow your wealth over time by taking advantage of capital appreciation and compound interest. This strategy is typically used to reach long-term goals, like building wealth for retirement or saving for a child’s college fund.


Saving and investing is not an either/or proposition. Generally, saving and investing go hand in hand to ensure financial stability. However, certain scenarios make one strategy better than the other.


Building up emergency savings is one of the first things to do before you start investing. An emergency fund would ideally help you following an unexpected financial event, like paying a hefty medical bill or covering expenses if you were to lose your job. It is recommended that you save the equivalent of three to six months of expenses and debt payments in an emergency savings fund.

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If you need money for short-term goals, like a down payment on a house or an upcoming vacation, you should choose to save. A high yield savings account or a money market account may be the best option to save for these short-term goals.


Savings accounts are highly liquid, meaning that you can access the money in your account as soon as possible. You can go to your bank, withdraw funds from a savings account, and have the cash right away.


Here are some tips for deciding when you should decide to invest.


Paying off high-interest debt, such as a credit card balance, will likely provide you with a sound financial foundation. You’re paying off an interest rate that’s likely higher than potential investment returns. Once you pay off high-interest debt, you can look to invest money in stocks, bonds, and other assets.

Recommended: Paying Off Debt—9 Strategies to Try

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There is potential for greater rewards when you invest because of a capital appreciation and compound interest. But when you invest, there is no guaranteed return on your investment, and you can lose part or all of the funds. This risk-reward calculation is best for long-term goals, because you can withstand the volatility of the financial markets. This strategy is best for building a retirement nest egg or savings for a child’s college tuition.


Contributing to an employer-sponsored 401(k) or an Individual Retirement Account (IRA) should be your first step in building wealth for retirement. These retirement accounts provide tax-advantaged ways to invest your money. Once you’ve maxed out contributions to these accounts, it may be good to explore additional investment products.

Recommended: IRA vs 401(k)—What is the Difference?


  • FDIC Insurance: You want to make sure the Federal Deposit Insurance Corporation (FDIC) insures your savings accounts. The FDIC guarantees up to $250,000 in nearly all savings account products if your bank fails.
  • Interest Rate/APY: Many traditional banks pay little interest on savings account deposits, so you may want to shop around to see where you can get the best rate. Certain institutions offer higher interest rates than large, brick-and-mortar banks.
  • Fees: You want to look for savings accounts with little or no fees. Many banks may waive fees if you have a large enough balance or enroll in direct deposit, while other institutions won’t charge a fee no matter what.

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  • Diverse investment options: You want to ensure your brokerage firm offers a wide range of investment products, including stocks, bonds, options, ETFs, and mutual funds. Additionally, brokerage firms that provide individual retirement accounts (IRA) may be ideal if you’re looking to save for retirement.
  • Commissions/Fees: High commissions and fees can eat away at your investments, so you want to look for brokerage firms with low investment fees.
  • Account Minimums: Many brokers require that a customer deposit a minimum amount to open an account. Depending on your financial situation, you may want to look for a brokerage account with an account minimum that you can afford without straining your finances.


Another thing to consider when deciding between saving and investing is how inflation affects your money with each strategy. With investing, there is a potential for your investments to keep up with inflation, which may be ideal in a high inflation environment. In contrast, inflation may eat away at your savings because the money you put into your account today will be worth less a year from now.

Nonetheless, no one strategy works for everyone because financial situations differ, as do financial goals and comfort with risk levels. The real question isn’t whether you should save or invest; it’s more about how to include a combination of both to meet your financial goals.

Learn More:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

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