March 2023

It has been a rough couple of weeks in the market topped off by the Silicon Valley Bank (SVB) crisis on Friday. Just as Yellen insisted that there would be no bail out, the Fed announced that all SVB depositors would have access to their money starting on Monday and it would be “protecting uninsured deposits across the entire U.S banking system”. Banks will also now be allowed to borrow essentially unlimited amounts from the Federal Reserve for the next year, as long as the loans are matched by safe government securities (globeinvestor.com). This sounds suspiciously like a bailout.

This situation has further complicated next steps regarding interest rate increases. The Bank of Canada decided to hold rates steady earlier this month, with the hope that inflation will continue its way down, while the Fed was expected to increase rates. With both US (311K new jobs) and Canada (22K new jobs) job numbers for February coming in much higher than expected, a half point increase in rates was anticipated (iacapitalmarkets.ca). However, with this latest financial crisis, they will likely have to re-think their rate hike, which could put further pressure on inflation. We will be watching closely over the upcoming weeks to see if this change in policy can stem any further liquidity issues without derailing the push to drive down inflation.

For now, we will hope that Biden holds true to his promise of “holding those responsible for

this mess fully accountable and to continue efforts to strengthen oversight and regulation of

larger banks so that we (U.S) are not in this position again” (www.cnn.com). And be grateful

that we are in Canada.

This information has been prepared by Shannon Straathof who is an Investment Advisor for IA Private Wealth® and does not necessarily reflect the opinion of IA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered. IA Private Wealth® is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization.