Hedge funds with long/short books have their lowest positioning in Financials since Mar 2020. So, if we see any positive news, expect a more volatile upside. Some biggies reported positively today. $JPM unsurprisingly was a key winner in the banking crisis and increased its guidance for NII, which increased by +49% in 1Q23. Deposits were up +2%. $WFC also saw NII up +45%. $C had a massive fixed income trading haul. Next week we’ll be looking at deposit drains at Western Alliance Bancorp, Comerica, and East West Bancorp.
Interestingly, before the Fed hiked rates, regional banks reported a surge in lending to insiders: directors, officers, major shareholders…and the trend continued last year, hitting almost $10bn by year-end per BBG. That was a roughly +12% increase y/y. Some of the biggest increases came at the hardest-hit firms: SVB, Western Alliance, and First Republic—plus Arvest Bank, which has ties to the Walton family, and Comerica Bank.
The USD has declined given fiscal concerns. The debt ceiling deadline is fast approaching, and we had a budget deficit of $378bn in March. The US Gov would run out of cash by Independence Day. Moreover, the US banking crisis made the USD less of a safe haven globally. But we caution against piling into this trade. Yields are up across the board today, especially on the front end of the curve, because better-than-expected prints for industrials and retail today mean that inflation could remain high and sticky. Those 4 rate cuts priced in by Fed Futures don’t look very likely to us. Fed Guv Waller seems to agree, out this morning supporting more rate hikes. Also, this morning we saw consumer views on inflation—rising to 4.6%, the greatest jump in ~2 yrs.
Walmart placed Bonobos, its self-described “upscale,” e-commerce-driven apparel subsidiary, in the clearance bin. Express and WHP Global agreed to acquire the business for $75mm. Walmart acquired Bonobos in 2017 for $317mm.
Bankruptcies are increasing to the highest level since 2010. Per S&P Global Data, March meaningfully edged up. Consumer Discretionary companies account for the highest proportion YTD, but Financials in March made a lot of filings (SVB, Signature Bank, Silvergate, etc.)
Boeing paused deliveries of some 737 Max jets after finding a manufacturing issue. The co said it doesn’t affect safety, but investors took out a pound of flesh from the stock today, seemingly disagreeing.
The Monetary Authority of Singapore paused its rate hikes and then gave a gloom and doom outlook, pointing to expected declines in global investment and manufacturing from tighter financial conditions that will get worse. They also cautioned investors from betting on the China reopening, talking about the fading benefits, as well as the lagged effects of hiking, which will continue to dampen growth.