Abbey Road Investment Views, Apr. 2023
US rates after the banking crisis
• Banks will tighten lending standards, (Focus p2)
• The Fed’s terminal rate is likely slightly lower
• Expect a Fed pause after May but no cuts yet
• A Fed pause could extend the NASDAQ rally
• Expect the dollar and gold to fade (p3)
At the risk of being surprised by new developments, we believe the worst of the banking crisis is over (see Focus page 2). Investors and uninsured depositors have identified a small
number of other banks which may struggle to carry on without outside support. Their share prices are down and some deposits have moved out. But the problem of unmarked losses
on securities portfolios is not serious for most banks because they have smaller portfolios (relative to size) than failed bank SVB and have hedged better. In fact most banks are enjoying high interest rate spreads as they can lend at higher rates while not raising deposit rates as much.
Download the full Investment Views of the month below.