More Bank Runs Imminent? 🙈 Barclays thinks so.

Today Barclays has warned of a second wave of bank runs, with deposit outflows already underway and banks expected to compete more aggressively for your cash.

The mismatch here, is that money market accounts pay higher yield and appear to be a safer vessel for cash than regional banks, given how poorly regional banks have managed their investments, and how the Fed has not committed to bailing out any more small or medium sized banks that run into trouble.

It’s too risky to park your cash in any bank that the Fed and Treasury doesn’t consider “too big to fail”. We’ll see what happens.

Relatedly, while The Fed and Treasury’s forceful actions have helped build confidence that current troubles for banks won't lead to another financial crisis, traders are heavily betting that the Federal Reserve will have to cut interest rates soon - likely pumping risk assets higher.

The bet is that the Fed may cut rates as soon as this summer, but contrarians think the Fed will keep raising rates unless there’s more turbulence with the banks or a deep recession arises - likely evident by a surge in unemployment.

Overall, the markets appear to be calmer than at any other point since the Silicon Valley Bank failure earlier this month. However, the situation remains fluid, and things could re-escalate.

Here’s what we brrr’d today:

• Wall Street remains bullish despite mixed signals and skepticism

• Barclays predicting more bank runs

Markets Continue To Rally

• Stocks rose on Thursday, with the S&P 500 up 0.4% in late trading, on track for a fifth up day in the last six, and the Dow Jones Industrial Average up 0.3%.

• Bailouts have helped build confidence that The Fed will print near infinite money to prevent financial contagion

• Traders are betting heavily that the Federal Reserve will have to cut interest rates soon, which could spark inflation and broad asset price appreciation

• The bet on Wall Street is that the Fed may cut rates as soon as this summer, but many professionals think the Fed would likely cut rates only if a more serious recession were on the way.

• Financial and bank stocks in the S&P 500 have not bounced like many other sectors since the bailouts. Today, financials gave up early gains and ended the day down.

• A report on Thursday showed slightly more U.S. workers applied for unemployment benefits last week than expected.

• On Friday, the Commerce Department issues its February report on consumer spending, which is the heart of the U.S. economy, and will also give the latest update on the measure of inflation that Fed policymakers prefer to use.

Bank Runs Round 2 on the Horizon?

• Barclays' in-house repo analyst Joseph Abate has warned that a second wave of a bank run has started.

• The first wave was triggered by solvency concerns, whereas the second wave is primarily driven by interest rate differentials between regional banks and money market funds. Money markets are safer and pay higher yield than regional banks.

• Bank solvency concerns triggered a shift of deposits from small to large institutions in the first wave of outflows.

• Slow-moving depositors who were comfortable with lower interest rates than most risk-free assets have now started moving their balances into money market funds.

• Money fund balances have risen an average of 20% over the past four rate hike cycles, and if the trend continues, money fund balances could grow by $1trn by the end of this cycle.

  ZeroHedge

MEME OF THE DAY

What We Own

$BTC, $ETH, $NVDA, $AAPL, $COIN, $XOM, $TSLA, $MSFT, $AMZN

Bitcoin ended flat. Nvidia won’t stop going up. Amazon finally showing some strength after announcing more layoffs.

Want our concise thesis on each asset? Have a friend sign up through your custom link below. When you do, we’ll send you the doc.

Got feedback? Follow the writer on Twitter @frank_locascio and send a message.

The BRRR is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.