Market Update: March 2023

Steven Neeley, CFP® |

“And another one gone. Another one gone. Another one bites the dust.” – Queen

As of this writing, Silvergate Bank, Silicon Valley Bank, Signature Bank and Credit Suisse no longer exist. They’ve either been pushed into receivership by regulators or, in the case of Credit Suisse, absorbed by its largest competitor, UBS.

Stock prices across the regional banking sector cratered. At one point the regional banking index lost 30% of its value while First Republic, PacWest and Western Alliance lost 90%, 66% and 58%, respectively.

The only reason First Republic didn’t also fail is because the Federal Reserve Bank basically forced other banks to inject $30 billion of capital into it in an attempt to bolster confidence in the banking sector.

What gets me is how for years all we’ve heard from market strategists is how strong the banks are, you know, after all the reforms resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Fun Fact: Barney Frank, the “Frank” in “Dodd-Frank” was a board member of Signature Bank. LOL. The reality is that no one should be surprised by any of this. The very nature of fractional reserve banking is inherently fragile, and this fragility has only gotten worse with the interconnected nature of financial markets, as well as the speed with which money can be moved around.

The irony is that the very regulation that was supposed to prevent crises like this actually led to it. After the financial crisis, banks were forced to hold more of their assets in “risk-free” Treasury bonds, which ended up losing significant value as interest rates rose, causing massive losses for these banks.

Sadly, no amount of regulation is going to make the financial system less fragile. Opinions abound about what should be done but none of them offer solutions that simultaneously allow for no reduction in economic growth, an end to financial crises and the return of moral hazard. The reality is that addressing the fragility of the financial system involves a series of trade-offs that require difficult choices and compromises. There are no elegant solutions here.

My suggestion: Buckle up because it’s gonna be a bumpy ride.

What else is happening out there?

  • Year to date, broad stock market indices are positive, though they’ve given up much of the gains seen through early January. It’s been the same story with bonds.
  • If you went to sleep at the beginning of the year and woke up on March 31 st , returns have been good. On a daily basis, however, we’ve witnessed some volatile swings.

Portfolio Positioning

  • During March, we took advantage of the market volatility by tax loss harvesting where possible.
  • We are overweight short-term bonds and we added a position in French stocks at the end of March.

Moving forward

  • The array of indicators we use is pretty mixed at the moment, though negative on balance.
  • The good news is that sentiment surveys suggest positive returns over the next 12 months. Counterintuitively, periods of negative sentiment, especially those hitting extreme levels, are often followed by periods of above-average returns in the next 6-12 months.
  • Both investor sentiment and consumer sentiment are at levels suggesting strong returns a year from now. While it’s hard to imagine that given everything going on in the world, it’s important to remember that markets love to climb a wall of worry.
  • The bad news is that if we get a recession, even a mild one, stocks are not priced for that at the moment and have a way to fall before being fairly valued. Bond yields are forecasting this outcome, so this is no time for complacency.
  • With the regional banking index down 30%, we view this as an opportunity for investors with a more aggressive and long-term mandate to buy shares of select lenders on the cheap.


It’s spring! My family and I can’t wait to start hiking on the weekends again and enjoying all the wonderful outdoor activities Indiana has to offer.

We’re going to try and make it our first Indy 500 this May, so we are really looking forward to that.