Bank of America researchers, led by Michael Hartnett, said in a note that there has been an enormous wave of inflows into cash funds across the world following the collapse of Silicon Valley Bank and the absorption of Credit Suisse into UBS. The team also predicts that credit and equity markets will falter in the next few months.“Credit and stock markets too greedy for rate cuts, not fearful enough of recession,” the researchers said, according to Bloomberg.
People typically go to cash when the stock market is performing poorly and financial uncertainty is high. The stock market has recently been roiled by the SVB collapse and has acted like a see-saw, swinging up and down unpredictably as investors digest different morsels of financial news. The latest victim of banking uncertainty is Germany-based Deutsche Bank, which plunged by 11% on Friday. It was the third day in a row that the megabank saw its value decline, with shares losing more than a fifth of their total value so far this month alone.
Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell have been working to shore up confidence in the banking system.
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