Silicon Valley Bank's failure might just spark a faster housing rebound
Can you believe it's only Thursday? Phil Rosen here. The sheer volume of financial news this week is enough to fill a very thick book — but if it's okay with you, today we'll keep it to a single newsletter.
One thing I'm thinking about this morning: Elon Musk said he sees similarities between the Silicon Valley Bank collapse and the 1929 Wall Street crash.
1. Before the banking world was rocked last Friday, I spoke to Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors, about her outlook for the year.
Evangelou told me that home prices and sales would dip this year, but she anticipated a rebound in 2024.
"It seems that home sales activity has bottomed out, and 2023 will be the turning point for the housing market," she said. "We don't expect any housing crash."
That was March 11.
She and I caught up again yesterday and had quite a different conversation.
"We had expected mortgage rates to come down to the lower range of 6% sometime in the second half of 2023, but now we may see that level in the coming weeks," Evangelou told me on Wednesday.
"The housing sector reacts immediately to changes in mortgage rates."
Already, rates have fallen in the wake of the SVB collapse, and the number of people applying for mortgages jumped 6.5% compared to a week ago, according to Mortgage Bankers Association data.
In Evangelou's view, the housing market's unaffordability dilemma could ease as a result of the recent troubles in the banking sector.
If mortgage rates dip to around 6%, she explained, more people would be comfortable purchasing a home compared to when it's around 6.7% or higher.
And looking ahead to the Fed's meeting next week, Evangelou expects policymakers to moderate their aggressive policy.
"The previous week I could see the Fed hiking 50 basis points, but now I think 25 basis points is the highest hike that they may take," Evangelou said.
Many traders agree with the economist's take. CME's FedWatch Tool tells us that markets think the odds of whether the Fed makes a quarter-point move or no move at all amount to basically a coin toss.
In other news:
2. Credit Suisse shares rose as much as 40% at the open in Zurich early Thursday, following news that the bank is borrowing $53.68 billion from the Swiss National Bank. The rebound has since pulled back, with shares currently up 18%. Here are the latest market moves.
3. Earnings on deck: FedEx, Dollar General Corporation, and more, all reporting.
4. Buy these 52 top stocks now before a multi-year market recovery begins. Strategists at BMO Capital Markets shared which names stand out as winners for the coming years — see the full list.
5. Catch up quick on why Credit Suisse is under fire this week. The Swiss bank's stock has tumbled, its largest shareholder said it won't provide any more financial help, and investor fears are ballooning. Read this to sound smarter at the water cooler today when you talk about Credit Suisse.
6. Bank of America took in over $15 billion in new deposits as SVB chaos spiraled. Bloomberg reported that the influx is part of the biggest deposit movement in a decade, with depositors ushering in a flight to safety in light of recent bank failures. In other words, "too big to fail" institutions are becoming even mightier.
7. A rogue version of ChatGPT had predicted that the stock market would crash this week. While there wasn't quite as severe a downturn as the bot forecasted, there was some prescience to its outlook. Here's what it got right and what it got wrong on its doomsday call.
8. These two friends bought their first home as college students. "Alan and I are not your typical success story," said Aria Khosravi, who took five years to complete high school and finished with a 1.9 GPA. The pair went on to build a seven-figure real estate flipping business in Denver.
9. A top UBS equity strategist shared which sectors to buy into for protection as stocks slide. Investors should keep their portfolios balanced with a defensive tilt, Nadia Lovell explained. If you're not buying overseas assets right now, she thinks you're missing out on future market leaders.
10. Apple will be the safest tech stock over the next six months. That's according to Deepwater's Gene Munster. The iPhone maker, he explained, is "still doing probably the best job of any big tech in terms of navigating this storm."
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