- According to Fundstrat’s Tom Lee, the stock market has seen the first signs that the US banking crisis is over.
- The CBOE Volatility Index closed below 20 for the first time since the Silicon Valley Bank collapse.
- “This is certainly a positive sign in general and a counter to the general pessimism of investors following the SVB bankruptcy,” Lee said.
The stock market has flashed important signals suggesting the ongoing banking crisis caused by the Silicon Valley Bank collapse earlier this month is over.
according to it fund strut In a note on Wednesday, Tom Lee highlighted that the CBOE volatility index fell below the all-important 20 level for the first time since the banking crisis began.
“The term structure of the VIX has also returned to normal contango … This normalization of spreads is often a sign that investors are realizing the worst crisis behind it. Told.
If investors anticipate an imminent financial crisis but it doesn’t materialize, a shift in sentiment can help propel stocks as investors unwind their bearish positions and become bullish.
Lee highlighted three other signals that the banking crisis is over. And while they haven’t been triggered yet, this guy has made progress in a week.
The MOVE index, which tracks bond market volatility, surged above the 200 level following the US banking crisis and stress on European banks such as Credit Suisse and Deutsche Bank. Lee wants the MOVE index to drop below his 150 level. On Tuesday, the index closed below his 160 at 156, quickly approaching his bullish threshold.
He also monitors deposit flows at local banks and believes that if they stabilize, it suggests consumer fears of further bank crackdowns are easing.
Consumers withdrew about $120 billion from smaller regional banks and deposited about $70 billion at larger ones, according to the latest Fed data summarizing the immediate aftermath of the Silicon Valley bank failure.
While these outflows are to be expected, the important thing to watch out for is when deposit outflows from smaller banks will begin to slow down or even reverse.
Finally, Lee wants to see First Republic Bank stabilize. Receive capital injection from mega-cap bank Federal Reserve Loan Facility.
With the stock all-in, which has seen the stock rise in the past six months since its mid-October low, Lee expects more gains to come. “If stocks fail to hit new lows after this crisis, the bears may capitulate.”