March 21, 2023, 5:09 pm EDT
Rebound: Sustainable or Short-term ?
The stock market continued to rebound the second day into a global bank turmoil process. UBS bank acquired the troubled Credit Suisse. US Treasury secretary Janet Yellen said the US would support banks in need. Fed Chairman Jerome Powell also showed its intention to raise rates and help banks at the same time.
Indeed, government intervention added the power for the stock market to rebound as major indexes rallied between 1% to 1.5%.
The important question is whether this rally is sustainable or it is simply a short-term bounce.
We are less optimistic about the government involvement to manipulate the market behavior. Although it looks effective, it does not solve the fundamental problem. In fact, hiding the problem could make a small pain into a much bigger nightmare in the future.
Technically, we can also see a mild volume engaged in today’s rebound.
Banks cheered up today as shown in the featured table of S&P 500. First Republic Bank (FRC) rebounded about 30% at 15.77 as a result. However, it is important to note that FRC is down from 147.68 level in February 2023. Its 30% rebound does not help much on its -90% decline within two months.
Therefore, the stock market is going through a tough time to balance with financial difficulty and government assistance. Short-term could climb a while but it is unlikely to be sustainable, in our opinion.