Another Week Without a Banking Crisis

Our mantra since the start of the banking crisis on March 10 has been that any day without a banking crisis is a good day for the stock market. Now our mantra is that any week without a banking crisis is a good week for the stock market. It was a good week for stock prices last week, especially on Friday, even though First Republic Bank continued its meltdown, which has been a "known known" since the crisis started. The "known unknown" is whether the crisis will spread despite  the liquidity facilities provided by the Fed to avoid further bank runs. So far so good: the crisis seems to have been contained.

Nevertheless, it ain't over until it's over. The members of the FOMC could still make a mess of the situation by continuing to vote to tighten monetary policy. We think they will announce a pause in rate hiking at the May 2-3 meeting of the committee. But they've surprised us before with their hawkishness.