Hey, Ross here:
And as we close out the week, let’s look at what’s really been dragging the market down.
Chart of the Day
That’s the KBW Regional Bank Index, which tracks the aggregate performance of 50 US regional banks.
Since the beginning of March, it’s been almost a one-way trip down. First Republic Bank has now been sold to JPMorgan. And PacWest bank is on the brink of collapse.
Contagion fears are high. They’re even overshadowing the positive sentiment stemming from a likely – and much awaited – pause in the Fed’s rate hikes.
In short, regional banks are dragging the entire market down. So how should we as traders play this?
P.S. Would you like special trade prospects and potential market moves sent directly to your phone? Text the word ross to 74121.
Insight of the Day
Market overreactions create opportunities
In my view, the market is overreacting to the regional banking crisis.
Will a few more regional banks go under before it’s all over? I think that’s pretty likely.
But will the contagion spread through the entire financial system in a 2008-esque situation?
Not a chance. The big banks are too well capitalized and are attracting even more deposits. And the Fed and/or government are practically guaranteed to step in should anything threaten the big dogs.
Still, it’s understandable why the market is reacting so strongly. Banks are supposed to keep our money safe – and if they can’t do that, then what can? The thought of our bank failing and taking all our money with it can stir up strong emotions, to say the least.
The good news is that overreactions also create opportunities.
In this case, it means that certain leading stocks have become “artificially” depressed. Their prices may be weighed down by the banking “crisis” – even though their price catalysts have remained completely unchanged!
This is something we can exploit. Click here to learn about my #1 price-moving catalyst – and how you can start using them in your trading instantly.
Editor, Stock Surge Daily