The banking sector has long been considered a cornerstone of economic stability. However, the 2023 banking crisis cast a dark shadow over financial markets. This raised concerns about bank stability, stock markets, and the economy's overall health. As analysts and investors brace themselves for potential impacts, various scenarios are explored, ranging from cautious optimism to gloomy apprehension.
In this episode, Rusty talks with Kevin Preloger, Portfolio Manager at Janus Henderson Investors. In his role, Kevin co-manages the U.S. Mid Cap Value and U.S. SMID Cap Value strategies. Kevin joined the firm in 2002 as a financial services research analyst.
Kevin and Rusty weigh some potential risks and scenarios from the 2023 banking crisis and possible future scenarios for the stock market, bank stocks, and interest rates. They also talk about how the banking crisis might impact the economy and the markets, the possible baseline expectation, what's a good case scenario, and what could be a bad one.
Key Takeaways
[02:32] - How Kevin got to Janus Henderson Investors.
[04:17] - Kevin's definition of risk.
[06:57] - Why we have a banking crisis.
[10:37] - The government's response to the current banking crisis.
[15:11] - Kevin's outlook on the current banking crisis.
[17:04] - How advisors should manage investment portfolios in light of the current banking crisis.
[21:31] - Kevin's perspective on bank stability for the next 12 months.
[24:00] - Kevin's take on the economy doing better.
[26:48] - A worst-case scenario on the economy and the markets.
[29:47] - The other risks investors should consider.
Quotes
[07:11] - "Interest rates were so low for so long. We had an issue in the late nineties with long-term capital management, Russian defaults, the tech wreck in 2000, the great financial crisis in 2008 and 2009, and here we are today. All these events in the last two decades have caused angst in the marketplace and destroyed a lot of capital." ~ Kevin Preloger
[08:19] - "The fuel on the fire was a fiscal policy that was too stimulative because the pandemic-related spending added to the issue. So interest rates, inflation, and regulatory and supervisory lapses are the things that might have been pointed out as issues in a banking crisis." ~ Kevin Preloger
[26:00] - "Any customer that's wobbling pre-pandemic was bailed out for two years with all the zero rates and fiscal stimulus. That's all gone away now. And if credit is contracting even more, the marginal borrower that's in a tough position before the pandemic is in a tougher position now." ~ Kevin Preloger
Links
Janus Henderson Investors
Take The Money And Run by Steve Miller Band
Peter Thiel
J.P. Morgan
Wells Fargo
Orion's Risk Intelligence
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Rusty Vanneman
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Disclosure
Access to the services presented is provided solely as a service to financial advisors. Orion Risk Intelligence does not make recommendations or determine the suitability of any security or strategy. Past performance of a security or strategy does not guarantee future results. Orion Risk Intelligence research and tools are provided for informational purposes only. While the information is deemed reliable, Orion Risk Intelligence does not guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with respect to the results to be obtained from its use.
1339-OAT-5/15/2023
