×
Thursday, March 28, 2024

Traders’ Flight to Safety Is About the Next Recession, Not Banks - Yahoo Finance

(Bloomberg) -- Fears of tightening financial conditions leading to a recession are driving traders to rethink their risk exposure and seek out safety in the stock market.

Most Read from Bloomberg

“It ain’t pretty out there,” said Charlie McElligot, cross-asset strategist at Nomura Securities International. “The bank ‘profitability crisis’ has become a ‘solvency crisis,’ and will act as a catalyst for a substantial tightening impulse in financial conditions.”

The repositioning started about two weeks ago when the problems in the US banking system became clear with the collapse of Silicon Valley Bank. The shift might look and feel extra violent at times, not just because the financial sector is at the center of it all, but also because the stock market had rallied to start the year. That’s now being quickly unwound.

However, the risks have been there for a while and go beyond the problems in the financial system. Double-digit declines in the likes of Deutsche Bank AG or France’s Societe Generale SA over the past month mostly reflect the impact on bank’s earnings if lending activity shrinks and the firms might have to ramp up their loan loss provisions.

Alongside banks, other growth-sensitive sectors tumbled...



Read Full Story: https://news.google.com/rss/articles/CBMiUmh0dHBzOi8vZmluYW5jZS55YWhvby5jb20v...