Here is an enlightening piece by our friends at Morningstar Investment Management reflecting on the following current topics:
Bank failures: With the most recent failure of First Republic, we've now seen three banks fail with combined assets of more than $600 billion. That's significantly higher than the combined assets of the 511 banks that failed from 2009 through 2022. And it's a record for a calendar year, surpassing the prior high in 2008.
Last Fed Hike? On May 3, the Fed hiked rates for the 10th time since March 2022. The federal funds rate is now 5.00%-5.25%, its highest level since September 2007.
Market Shrugging Off Bank Troubles: Since March 10-the date of the first bank collapse-many might be surprised to see the market has charted an upward course. The "fear index," or the VIX, reflects that. At 15.8, the VIX is below its long-term average and well below any recent peaks observed at past points of hysteria.
The curious case of the labor market: Despite endless talk of recession, the labor market is telling a different story. Debatably, among the strongest ever-the U.S. unemployment rate is currently 3.5%, a historically low level with data going back nearly 70 years.