VYM - Banks Failing Interest Rates Rising - Keep Buying Assets
2023-03-21 03:05:00 ET
Summary
- The stock market is still up year-to-date in 2023, despite the banking crisis/economic turmoil.
- Therefore, it’s doing what history says usually happens – being up after a significant down year in 2022.
- Therefore, the Diplomats are continuing to buy dividend stocks that are on sale.
We are in full-fledged crisis mode in the United States and in the world it appears. Given the failures already of Silvergate ( SI ), Silicon Valley ( SIVB ) and Signature ( SBNY ), Credit Suisse ( CS ) is now being bought out by UBS ( UBS ) within the European countries.
This is not just a U.S. problem. The global pandemic from COVID-19 was just that, a global problem. The contagion, as they are calling it, is everywhere. That’s what happens when trillions of dollars of money is released out to the public and receivers banked it and the bankers invested it. Invested into long-term, low-rate assets.
Another financial crisis?
Is this 2008 all over again? Those are the comments that I’m receiving from friends, family members and even co-workers.
Yes, these are the first bank failures since 2008’s financial crisis. No mistake there. The banks that failed last week were niche-based for the most part – bring out the red carpet for Cryptocurrency and start-up/venture capital firms.
However, there is/has to be a trickle effect and believe that will still yet to be seen, similar to what increases in interest rates do by the fed – you don’t really know the impact until weeks or months are taken in.
Now, over the weekend, Credit Suisse is being bought out by UBS Financial, creating a powerhouse, as UBS is also able to buy assets for pennies on the dollar.
Next up, New York Community Bank. They are now spending $2.7B for $34.8B assets , to go along with 40 branches from Signature Bank, the bank that failed Sunday March 12th. Again, another massive bank being created from the ashes of poor investing and fear/lack of confidence in the banking system.
Has the consumer lost confidence in the banking system? JPMorgan ( JPM ), Citi ( C ), Bank of America ( BAC ), Goldman ( GS ) and others grouped together to place $30 billion on deposits at First Republic Bank ( FRC ) to keep them afloat.
This was a bright move, in my opinion, to instill the confidence in the system, but I am not sure consumers have been all-in yet. Here is the regional banking index ETF price movement:
Keep investing, buy assets
Is there fear? Sure, there is. Am I slightly uncertain about the future of the global economy? I’d be lying if I didn’t say yes. However, I’m not that stressed. Cannot let the emotion in.
Cannot let fear consume you. No doubt about that.
The stock market was down in 2022 and it’s rare the entire stock market is down 2 years in a row, though it does happen. However, here are the years after the last financial crisis:
Can we expect the same? Maybe. One thing is for certain – I would never bet against historical averages and against the U.S. economy.
The stock market is still up year-to-date in 2023, despite the banking crisis/economic turmoil. Therefore, it’s doing what history says usually happens – being up after a significant down year in 2022.
Will that stick? We have future rate hikes coming and possible future bank failures. Fortunately, this could be a moment in time that we won’t see for another decade, as it comes to asset prices.
Therefore, the Diplomats are continuing to buy dividend stocks that are on sale. Bert is buying regional bank stocks and investing further into dividend aristocrats.
Lanny is buying with his trifecta Vanguard ETF investing strategy , with VYM , VOO and VIG . In addition, he’s also been buying shares of dividend kings, such as Johnson & Johnson ( JNJ ), a TOP 5 Foundation Dividend Stock , as well as other stocks such as Hormel ( HRL ).
Key focus here is to turn off the noise and keep buying assets. Continue to save money and invest in undervalued assets.
Conclusion: Banking crisis
Therefore, for a few key takeaways from this short article:
- The U.S. is resilient to crisis time periods. Look back to as recent as COVID (though that’s a reason we are in this type of a mess), the Financial Crisis and the tech burst. The rebound will happen, just a matter of when.
- Turn off the noise and keep buying assets, just like you have been in 2020, 2021 and 2022. No changing that strategy in 2023!
- Expect the unexpected. There are many outcomes and scenarios that could happen from the type of crisis happening right now. Expect that you won’t expect what could happen. Work with what you know and invest with what you have!
How are you investing during this time period? What stocks are you buying right now or are you staying on the sideline? Where is your confidence level at, right now? Share in the comments below!
As always, good luck and happy investing! Thank you for stopping by.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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Banks Failing, Interest Rates Rising - Keep Buying Assets