FINANCIALS

One Year After Silicon Valley Banks Collapsed, Bank Stocks Are Back, But The Risks Never Left

Life really does begin at 40, but for Silicon Valley Bank (SVB), that’s where it ended. It's been a year since the major financial institution collapsed after investors withdrew over $42B in mere hours. When the dust settled, five other banks holding assets worth $548B went under — leading to the second and third-largest bank failures in US history.

What’s left in the vault? Since then, investors’ optimism in banks has improved, especially among large financial institutions. The Financial Select Sector SPDR Fund ($XLF) has rallied over 29% to an all-time high — slowly trickling down to once-downtrodden regional banks. After the crisis, the SPDR S&P Regional Banking ETF ($KRE) lost nearly half its value. It has regained over half of that, but the recovery hasn’t been smooth.

• In recent weeks, New York Community Bancorp ($NYCB) reported problems with its commercial real estate (CRE) portfolio — which has led to fresh anxieties over the health of regional banks.

• Despite its credit being downgraded to junk and its stock falling by more than 60% year-to-date, $NYCB managed to raise more than $1B in capital to shore up its balance sheet, something its fallen comrades failed to do.

Sounding the alarm bells

Unfortunately, it might be too soon to celebrate the fact that America only saw five bank failures last year (rather than the 25 in 2008). Treasury Secretary Janet Yellen is warning us that there will likely be more bank failures as losses mount. Regulators are singing the same tune, especially as CRE risks remain considerable.

• The number of banks on the Federal Depository Insurance Corporation’s “Problem Bank List” rose to 52 last quarter, up eight from the previous quarter — which represents more than 1% of the 4.5K insured institutions in the US.

• Fed Chairman Jerome Powell says that the Fed had identified and engaged banks with high CRE exposure — adding that there “will be bank failures, but not the big banks” (Fortune).

What’s at risk? US office vacancies are at a record high of 19.6% and are expected to climb into 2025. A working paper by the National Bureau of Economic Research warns that as many as 300 regional banks could go under this year due to CRE-related distress — but whether the Fed or other investors will (or need to) intervene is still up in the air.

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LARGECAP RECAP

☀️ America’s top new job markets are heating up — literally

If you’re on the hunt for a fresh job opportunity, you might need to look beyond your usual spots. But hey, that could be a plus if you’re into sunnier, warmer, and more affordable places. Since 2018, America’s hottest job markets have all been in the Sunbelt region, which has seen nearly 3.7M new jobs added, leaving other areas in the dust.

• Since 2019, job growth in the Sunbelt has been 3x faster than in other parts of the US — surpassing metros in the west (0.84M jobs added), Northeast corridor (0.21M), and legacy regions (0.11M).

• Texas-based cities like Dallas, Houston, and Austin represented nearly a quarter of this growth — while jobs in smaller Sunbelt cities such as Huntsville, Albuquerque, and Jackson have also seen a surge.

From snowbirds to sunbirds: Job creation has hit a wall in traditional metros like Chicago and iconic Northeast cities like New York City, which have actually lost jobs since the pandemic began. Even on the West Coast, meccas like San Francisco are struggling to create new jobs as remote work and more affordable cities become increasingly appealing.

AI demand could send silver prices soaring: Double digit growth in AI servers and switches could drive demand for key components built with gold and server. And one prediction claims that could send it to $100/oz, nearly quadruple its current levels. Learn more about silver’s potential with your Free 2024 Gold & Silver Kit (Plus: see if you qualify for $10K in free silver) →*

Markets & Economy

Biden lays out 2024 platform in State of the Union: The President railed against Trump’s rhetoric (without mentioning him by name), asserted his commitment to abortion access, and laid out plans for getting humanitarian aid into Gaza — while at least temporarily easing some concerns around his age and fitness. [Read]

Are more homeowners thinking of selling? The housing market has been in a deep freeze ever since rates went up, but listings in February increased ~13% YoY. Sellers may be taking advantage of high home prices — or they may be accepting that rates probably won’t come down for a while anyway. [Read]

More women are in the workforce than before the pandemic: Flexibility from remote and hybrid work options has benefited women, who are often tasked with more childcare responsibilities. Another reason for the uptick: a shaky economy has meant more households seeking out a second income source. [Read]

Business & Wealth

Astra ($ASTR) going private after brutal run on the public market: The space company’s three launch failures certainly haven’t helped matters, putting its rocket launches on hiatus since June 2022. Its value is ~$13M now — a far cry from its $2.6B valuation three years ago. [Read]

FDA delays Eli Lilly’s ($LLY) Alzheimer’s drug approval: The surprise move comes as regulators need more time to assess the drug’s safety and efficacy. Late-stage trial results were promising, but concerns linger over potential brain swelling and bleeding. [Read]

Equinox raises $1.8B amid cash crunch: The luxury gym chain, a popular third place for affluent urban dwellers, plans to use the money to refinance more than $1.2B in debt amid a downturn in memberships and SoulCycle sales. [Read]

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DIGIT OF THE DAY

US Employers Cut 85K Jobs Last Month, Marking Highest February Layoffs Since 2009

The job market’s thermometer is out of whack, with hiring hot and layoffs more frigid than ever. American employers slashed ~84.6K jobs last month — up 9% from a year ago — marking the toughest February since the Great Financial Crisis, as Challenger, Gray & Christmas reported.

• The technology sector took the biggest hit, with ~28K job cuts, although it’s a 55% improvement from last year’s tech layoffs.

• Financial firms followed closely behind, cutting ~26K jobs — showing a 56% increase in job losses in the sector compared to the first two months of 2023.

Job market update: Despite adding 275K jobs in February, the US unemployment rate reached a two-year high of 3.9% — indicating a durable but slightly cooler labor market. Sectors like government, education, and health drove about half of this growth. Ian Shepherdson from Pantheon Macroeconomics noted, “The current trend in payrolls is steady, but a clear downturn is coming.”