Michael Sund, CFA
Investment Strategist
Michael Kassab, CFA
SVP, Chief Market Strategist
With the failures of Silicon Valley Bank on Friday and Signature Bank New York on Sunday, there were growing concerns over the weekend regarding the safety of bank deposits at smaller regional and community banks. On Sunday evening, the Federal Reserve, FDIC, and Treasury announced a new program called the Bank Term Funding Program (BTFP). With this new Program, the three agencies have moved forward with fully backstopping the depositors of both Silicon Valley Bank and Signature Bank, along with promising to help any other struggling banks through the new credit facility. This action should bolster the capacity of the banking system to safeguard deposits and ensure the stability of the US banking system. Calamos Wealth Management clients have little to no direct exposure to either of the failed banks.
The new credit facility will allow banks, savings associations, credit unions, and other eligible depository institutions to take advances against their US Treasuries, mortgage-backed securities, and other qualifying assets as collateral at par value, eliminating an institution’s need to quickly sell those securities at a loss in times of stress. This facility is a de facto backstop of the deposits in the US banking system and banks experiencing heavy withdrawals. However, as a matter of precaution, we recommend clients review their personal deposit balances at financial institutions relative to current FDIC insurance limits.
Overall, the change in market conditions since last week have dramatically altered the Federal Reserve’s rate hike trajectory going forward and supports a potential pause in future rate hikes. The growing prospects of a Fed pause and corresponding decline in interest rates across all maturities are supportive of bond and equity valuations and their respective prices. Rest assured, we continue to monitor the ongoing situation and will implement any necessary portfolio shifts to mitigate risks as they arise.
Today’s market action is a timely reminder of the benefits associated with a broadly diversified portfolio and a longer-term approach to investing. If you have any questions on your specific portfolio, please do not hesitate to reach out to your wealth advisor for a more detailed discussion.
Diversification and asset allocation does not guarantee a profit or protect against a loss. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Calamos Wealth Management, LLC [“Calamos]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Calamos.
Please remember to contact Calamos, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Calamos is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Calamos' current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at wm.calamos.com.
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