SVB's downfall shows the Fed broke something in the economy, and other things could break with more rate hikes, Charles Schwab's chief investment strategist says
And there's likely to be more signs of damage stemming from the impact of Fed rate hikes, Sonders warned, particularly since them work with a lagged effect in the economy.
"I would be surprised if there weren't other things that break. Maybe not directly related to the problems of SVB, but to some degree we're already seeing breakage in terms of things like weakness in the housing market, other areas that are clearly in recession in the economy, even if we're not in an overall recession," she said. as soon as their next policy meeting later this month, in order to quell panic stemming from the implosion of SVB, Goldman Sachs analysts said.
But Sonders doubted the Fed would pivot from its tightening policy, particularly since Silicon Valley Bank's downfall was more due to issues unique to the bank, rather than being a systemic issue. "I think they're not likely to step into this situation until the point where it's either a serious system-wide problem, or inflation has been combated sufficiently enough that they can look towards easier monetary policy," she said.
Despite previously betting on a 50-basis-point rate hike this month, markets have raised their expectations of a softer policy move, with 61% odds the Fed raises rates just 25 basis points, according to the
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