BlackRock Investment Institute with the note published 13 March in response to the turmoil in the US banking system.
The key points they make:
- U.S. authorities have acted decisively to protect depositors from the collapse of two regional banks.
- This is not a 2008 repeat. Yet we see this as an example of economic damage and financial cracks from rapid rate hikes.
- We prefer short-term government bonds for income. Most equities aren’t fully pricing the economic damage of hikes, in our view.
Further detail from the report:
- We see knock-on effects for the economy – reinforcing our expectation of recession.
- We see financial conditions and credit supply tightening, especially to sectors such as tech. These developments are also likely to hurt confidence and increase risk aversion.
- Moreover, we don’t see these developments allowing the Fed to halt its rate hike campaign – this is a very different environment from 2008 when all monetary policy levers were used to support the economy. Instead, by shoring up the banking system, the Fed can focus monetary policy on bringing inflation down to its 2% target.
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The note did not mention the analysts' views on the March 21/22 upcoming Federal Open Market Committee (FOMC) meeting. '
There are plenty of those here though if you are interested:
Federal Reserve Chair Powell