The Evelyn Partners Investment Podcast: have central banks done enough to stop contagion?

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The turmoil in the banking sector has unsettled markets. While Silicon Valley Bank and Credit Suisse are isolated cases, there are implications for the global economy from banking fragility. In particular, it may curb bank lending and act as a de facto rate rise, allowing central banks more flexibility in their rate-setting policy from here.

Any contagion appears to have been averted for the time being. Collectively, major banks around the world are much more robust than they were during the last crisis and regulators have stepped in quickly to avert a crisis. Confidence has tentatively been restored to financial markets.

For stock markets, it is possible to build a gloomy scenario or an optimistic one. On the one hand, China’s reopening is fuelling growth and liquidity is improving. On the other, inflation still looks relatively sticky and some economic weakness appears inevitable. Nevertheless, there is already a degree of bad news priced into markets, which will provide a cushion for investors in the coming months.