U.S. Consumer Confidence Wavers, Regulators Found SVB Red Flags a Year Ago and the Fed Hikes 25 Basis Points in this Week's Edition...
Take a Lap Around the Industry
Credit Suisse Bondholders Take Legal Action Over UBS Deal Writedown (CNBC)
Homebuilders Rally as Resale Data Snaps Record Decline (Bloomberg)
Nvidia and Google Cloud Team Up to Offer Advanced AI Capabilities (MarketWatch)
Russia Extends Crude Output Cut through June (Bloomberg)
U.S. Consumer Confidence at Risk as Banking Turmoil Continues
The recent failures of Silicon Valley Bank and Signature Bank have increased scrutiny of regional-bank deposit levels and sparked concerns about consumers delaying big purchases. High borrowing costs and the failures of banks have contributed to financial stress among U.S. households, leading some to become more frugal and save rather than spend. Consumer spending accounts for about 70% of U.S. output, making it a key factor in the health of the economy. Retailers have experienced declining spending, while real-estate brokers have reported increased skittishness among buyers, with some hesitating to make purchases due to concerns about layoffs and the banking sector. High interest rates have also caused some consumers to move their money from deposits at regional banks to other options offering higher returns. The health of the economy could depend on whether consumers can rely on excess savings and income growth continues to outpace inflation, as credit becomes increasingly limited.
"Because of uncertainty, a business might not go ahead with hiring or investment, or households may become more frugal—saving rather than spending..."
Carl Tannenbaum, Northern Trust
Private Funding Pulse Check
Andrew Forrest's Family Office, Tattarang, has recently participated in a Series A funding round worth $12M for Mindset Health, a digital hypnotherapy technology company developing applications to help people improve their health
SupplyCaddy, a leading global manufacturer and supplier of packaging and disposables for the food industry, has secured a $3.2M Seed funding round investment from CEAS Investments (Otter Inspirations, LLC)
Artera, the digital health leader in patient communications, has secured a $90M Venture investment from Jim Breyer's Family Office, Breyer Capital
Moore Ventures and Gandel Invest took part in a $50M Series A deal with Reebelo, a leading marketplace for refurbished tech devices and lifestyle products
Regulatory Shake-up at SVB Sparks Fed Alarm More Than a Year Ago
The Federal Reserve has promised to investigate its supervision of SVB Financial Group's Silicon Valley Bank, which recently filed for bankruptcy protection. Senior examiners had flagged a critical issue concerning how the bank tracked interest-rate risks nearly a year prior to the bank's ultimate collapse. SVB had grown significantly after the U.S. Congress eased stress-test rules in 2018, and by early 2021, it held $220B in assets. Additionally, the bank's lack of a chief risk officer for much of last year has emerged as a key issue. SVB invested heavily in low-interest-rate bonds that plummeted in value as the Fed increased rates over the past year. When withdrawals forced the lenders to sell these assets, they suffered severe losses. The Justice Department and the Securities and Exchange Commission are investigating SVB's downfall, including whether stock sales by executives violated trading rules.
"The events surrounding Silicon Valley Bank demand a thorough, transparent and swift review by the Federal Reserve..."
Jerome Powell, Federal Reserve
Fed Enacts Ninth Interest Rate Hike Despite Banking Crisis, Signals Possible End to Hikes
The Federal Reserve has announced a quarter percentage point interest rate increase, the ninth hike since March 2022, and projected that there may only be one more rate hike ahead. The rate-setting Federal Open Market Committee expressed caution about the recent banking crisis, with the committee noting that future increases are not guaranteed and will depend on incoming data. The committee noted that the U.S banking system is sound and resilient but the recent developments are likely to result in tighter credit conditions for households and businesses, and could weigh on economic activity, hiring and inflation. The committee unanimously approved the rate hike, which takes the benchmark federal funds rate to a target range between 4.75%-5%. The projections released along with the rate decision indicate that a majority of officials expect only one more rate hike ahead, with a peak rate of 5.1%, unchanged from the last estimate in December.
"The Committee will closely monitor incoming information and assess the implications for monetary policy...The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time."
FOMC Committee
Former Jefferies Executives Launch CROSSx Crypto Exchange
CROSSx, a cryptocurrency exchange targeting high-frequency traders, has been launched by former Jefferies executives, with the support of Two Sigma, a leading quant investing firm, among other traditional finance and digital asset companies. Unlike popular crypto platforms such as Coinbase Global Inc. and Binance, CROSSx will only provide trade execution and won't offer custodian or prime brokerage services. The exchange will support spot trading at launch and expand to crypto derivatives later, targeting international institutional investors outside the U.S. The platform will offer faster matching engine services for trades than existing crypto exchanges by mimicking high-frequency trading speed in traditional markets. The founders believe that as more traditional trading firms enter the crypto sector, the need to compete on the speed of orders will be more pressing, resulting in a race to reduce latency in digital assets.
"[Two Sigma] can see themselves using the platform and interacting with the platform. They want to participate, not just in having an equity stake, but also helping the company and providing feedback and being a player in early days."
Carson Group makes its first full acquisition of the year, adding Baton Rouge, LA-based RIA with $500M in assets (WM)
Altruist has purchased the brokerage and custodial platform Shareholders Service Group (SSG), a group that serves more than 1,600 advisors across the U.S. (FAIQ)
First Mid Bancshares, Inc. has announced the execution of a definitive agreement to merge with Blackhawk Bancorp, Inc., bringing their combined assets to over $8B (GlobeNewsWire)
Written by:
Andrew Popp | Sr. Research Associate
FINTRX delivers an industry-leading suite of private wealth data and research solutions to the alternative investment space and private capital markets. Engineered to help clients identify and access family office and RIA capital intuitively, the FINTRX platform ensures accurate and updated data and research on 850,000+ private wealth records globally. To subscribe to our newsletter and see previous versions click below.
