The excellent Michael Wilson at Morgan Stanley making more sense.
What’s the Message?
Since the events around SIVB and SBNY, market participants have been focused (rightly) on how the government will deal with the stress in the banking system and whether the economy can withstand this latest shock. After a rough couple of weeks,especially for regional banks and stocks that are likely to be affected the most, the major indices appear to be shrugging off the risks. Many are interpreting the sharp increase in bank reserves as another form of Quantitative Easing (QE) and are having the pavlovian= response that such programs are always good for equity prices. As we discussed in prior notes, we do not think that is the right interpretation of the latest increase in the Fed’s balance sheet (Exhibit 1).
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