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Navigating market response to First Republic

  • First Republic appears on the precipice of failure and without outside aid the fallout would reverberate throughout markets.
  • It would seem odd if First Republic is arbitrarily allowed to fail whereas Silicon Valley Bank and Signature Bank were not.
  • If no white knight steps in, or the FDIC doesn’t ensure customer deposits, market participants could see this as a pivot away from the narrative that all banks are “too big to fail” and thus a rush to safety would likely ensue.
  • As of right now, the only course of action is to wait for an outcome. If no additional assistance comes, my bullish outlook will terminate at least in the short-term. With bearishness so heavy, however, I believe a strong bounce would be in the cards.

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JANUARY 12, 2025 OBSERVATIONS

Multiple selloffs in equities following strong jobs and ISM data highlights a general concern of returning inflation at a time when valuations are already quite...
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