Two of the big winners from the March banking rout were gold and bitcoin. Both surged as deposits flowed out of global banks and into alternative safe-haven assets. It contributed to a 40% bounce in bitcoin and new life for crypto more broadly.
Both have faded since the height of the banking worries but both are showing life again today -- albeit only feint signs of life -- in a market that's otherwise getting battered.
The moves in gold and bitcoin touch on the bigger question: Are we going to have a re-do of the bank rout trade?
Certainly, something needs to be done about First Republic Bank. Shares are down 43% today after quarterly numbers showed about $100 billion leaving the bank in March.
The thing is, other beaten up banks have fared ok. Western Alliance Bank reported last week that deposits were down 8% y/y. That's not great but certainly not fatal.
Is there a scenario where a fresh run starts on FRC and spreads again? I suppose it's within the realm of possibility but more more likely is that anyone who has left money in these banks isn't going to take it out now.
So to me, the bank rout is over. Perhaps FRC will need to be cleaned up and it will be an ugly process but I don't see a repeat of the March rout unfolding.
But maybe I'm wrong. Look at the bond market where US 2-year yields are down 20 bps today and nearly 30 bps this week. There might be dumb money trading banks but there certainly isn't in bonds.
Layered into all this is earnings season. The numbers so far have been strong and today's commentary suggested fallign inflation pressure. Perhaps that's some of the reason for weakening yields? It could also be a big part of the reason why no one wants to fade the regional banking fear.
Why jump in here when you can wait until Thursday and get a better sense of how mega-cap tech is doing?
Ultimately, I think this dip is bought but it's too soon. With that, I wouldn't be chasing gold or bitcoin here.
