Three Ways to Benefit From the Global Banking Nightmare

The collapse of Signature Bank and Silicon Valley Bank sent shockwaves through the financial markets, but it may be fueling a rebound in some assets. 

After panic ripped through markets last week, analysts are sounding the alarm on some tickers that have well overshot their downside. What’s more, some analysts have suggested that the added pressure on the financial sector could slow the pace of Fed rate hikes, which would likely help certain risk assets.

Whether you’re looking for a short-term win or to shore up your long-term returns ahead of more volatility, you’ll want to keep an eye on these assets in the coming days.   

Bitcoin (BTC)

On Sunday evening, two days after Silicon Valley Bank’s collapse, the government announced that the bank’s depositors would get their money back, and it would provide an additional funding facility for distressed banks.

Bitcoin bulls have claimed the digital currency is a way for investors to shield themselves against government moves, such as quantitative easing and looser monetary policy, which they say erodes the value of fiat currency. Industry insiders say that the anticipation of a slower pace of interest rate hikes from the Federal Reserve is helping bitcoin. Proponents also point to bitcoin’s finite supply as a critical feature of it being a store of value.

“This past week’s events around the failure of SVB and other banks have also shone a spotlight on the power of decentralized currencies that people can fully custody and own,” said Vijay Ayyar, vice president of corporate development at crypto exchange Luno.  “Decentralized finance is beginning to hit home in terms of a concept to many more people now.”

Bitcoin is up nearly 50% this year, beating major stock indexes and commodities.

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Charles Schwab Corp. Common Stock (SCHW)

Charles Schwab shares plunged 24% last week along with regional banks as traders worried they would have to sell their bond holdings early at significant losses to cover deposit withdrawals, like Silicon Valley Bank. However, Schwab CEO Walt Bettinger said in an interview with CNBC that Schwab is still experiencing “significant” asset inflows.

Earlier this week, Credit Suisse analyst Bill Katz upgraded the brokerage firm to outperform from neutral, saying it’s time for investors to “take advantage of the sharp share price decline.” 

“We expect the net new asset (NNA) story to remain robust and capital ratios to quickly rebuild as we look into 2024-25, with the current value giving investors an opportunity to step into a high-quality, large-cap secular beneficiary,” Katz wrote.

The analyst’s $67.50 target price, down from $81.50 previously, means shares can rise another 14% from Wednesday’s closing price. The stock is down nearly 32% this year.

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 Ark Innovation ETF (ARKK)

While most of Wall Street is in panic mode amidst the banking crisis, Cathie Wood’s flagship fund ARKK reeled in $397 million in new money on Tuesday, the most significant one-day inflow since April 2021, according to FactSet.

Investors are piling into the innovation fund under the belief that the current banking chaos may cause the Federal Reserve to pause its rate hike campaign, which would benefit growth stocks. “Once the Fed stops looking backwards at CPI inflation and starts addressing the deflationary banking crisis that a 19-fold increase in short rates and an inverted yield have caused, we would not be surprised to see a return to the Roaring Twenties,” Wood said in a tweet early Wednesday.

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