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Your Quiver | Thursday, May 4, 2023

CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.

Higher Volatility

Remember those good old days of the VIX declining down into the 15’s? Well, we’re back above 20 today on the heels of Fed and PNC Day. Don’t listen to anyone who says we’re smooth sailing right now. Just look at the stock prices for PacWest, First Horizon, and Western Alliance.

Fed Recap

Basically, Powell raised rates by 25bps. In the Q&A, he kept the door open for future moves, but reiterated that fighting inflation is important. So, he’s bought some time (until June), which gives the Fed more data to review on labor, broader inflation, GDP growth trends, more earnings, the debt ceiling conversation, credit tightening, and bank failures. Post-meeting, traders are pricing in a pause in June and cuts starting in September—despite Powell saying that he doesn’t think that will happen. Remember, we’ve moved from 25bps to 5.25%–and inflation is still high.

ECB Recap

Not surprisingly, they raised by 25bps in the EZ.

PacWest Punch

The bank is saying that deposits are ok, and it’s exploring strategic sale options. No one seems to want the whole bank, so maybe others can pick off key pieces. But investors and depositors can’t feel too great, especially after knowing the stories of SVB and FRC. Although the Fed may think that risk is fairly contained right now, Ackman and Kaplan are warning that there’s more banking stress to come. Cue the PacWest Punch.

The Next Thriller

Everyone and their cousin are looking into Goldman’s role in SVB’s collapse. To thwart a credit rating downgrade, SVB sold Goldman a piece of its investment portfolio and realized a $1.8bn loss, with Goldman generating fees and hoping to flip the investments. Then, Goldman tried to raise capital for the bank from GA and other investors, which didn’t materialize. Some are saying that they should have lined up the capital beforehand. Then, depositors may not have run the bank and sent $42bn fleeing, or around one-quarter of its year-end deposit levels.

Two Big Deals

Yesterday, the FTC proposed a blanket prohibition that would stop Facebook from monetizing youth data, even after the child turned 18. They couldn’t release new or modified products/services without written confirmation from the assessor that its privacy program is working. Wow. As a parent, I applaud the move, even if our kids aren’t using their products. Also, TikTok is launching an ad product whereby it will give creators/publishers a 50% cut. Your move, Meta?

Inventory De-Stocking

We’re seeing a pattern here. Estee Lauder brought down guidance due to ongoing retail de-stocking. Qualcomm pointed to inventory burn continuing for the next “couple of quarters.”

ESG Trends

Global ESG funds underperformed the market so far in 2023; per Bernstein, Asian ESG funds relative underperformance was -2.7%, European -1%, and North American -0.3%. Outflows have been big for North American ESG funds, which experienced a record outflow of $12bn in 1Q23. Sectors regularly excluded by ESG investors have reversed gains from last year and underperformed in 2023. Bernstein had some interesting factoids; since 2018, top ESG funds with global and Asian mandates outperformed by 8% and 5.3% respectively, top North American ones performed in line, and European funds underperformed by -10%. They also noted some decent companies that they believe are un-loved and set for a rebound, including Orsted, Samsung SDI, and LG Chem.


OPEC+ is set to defend the price of oil at its June meeting. Russia said it is committed to cut output. So, be careful if you’re short.


China is using the yuan for contracts, from oil to nickel, and its share of global trade finance has tripled since the beginning of 2020. Stop sleeping, US.


It’s about Apple post-close. Revenue trends. Buyback trends. Mix trends.