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The recent banking crisis has immediately lowered expectations for future inflation expectations and interest rate hikes. Why? There is a direct correlation between economic activity and loan volume, and loan volume is destined for a short term contraction, at a minimum, as the regional banks, and even the big money center banks, reassess their positions and await whatever revised government regulation comes out of this banking crisis.

If you have tuned in to financial news, or any news for that matter, you are likely aware of the turmoil which began last week in the regional banking sector. It started when Silvergate Capital, a central lender to the cryptocurrency industry, sought a $2.25 billion loan to shore up its balance sheet. The move raised questions about the bank’s financial strength and triggered $42 billion in withdrawals.

We recently read how former Microsoft CEO and current owner of the Los Angeles Clippers Steve Balmer made the news for potentially violating IRS guidelines on how investment losses and gains are taxed. Balmer, with a net worth of roughly $81 billion, outsourced the management of his sizable investment portfolio to a large Wall Street bank. Unfortunately, trades executed by his investment manager in 2015 ran afoul of the ambiguous IRS guidelines covering wash sales.

The US economy has been surprisingly resilient, largely due to strong consumer spending driving economic growth despite persistent price increases for both goods and services. Rabid consumer demand has thus far kept US economic growth positive, and it appears we may avoid negative GDP growth in the first quarter, contrary to the projections of most major Wall Street banks.

IMPORTANT – 2022 Tax Information Regarding your Pershing Taxable Accounts

By Dr. George Calhoun
Hanlon Investment Management Advisory Board Member
Executive Director of the Hanlon Financial Systems Center

We are in the midst of fourth quarter 2022 earnings reporting season, with big banks having already reported and big tech results imminent. The consensus opinion of the market is that we are in for some underwhelming results, in both Q4 of 2022 and for at least the first quarter of 2023. This has been the theme for much of the year-long bear market – earnings expectations are too high and need to be adjusted.

2022 should have been a year in which global investors breathed a collective sigh of relief, as we put the worst of the COVID-19 pandemic behind us and navigated the lingering variants with significantly lower hospitalization and mortality rates.

By Dr. George Calhoun
Hanlon Investment Management Advisory Board Member
Executive Director of the Hanlon Financial Systems Center

On December 23, 2022, the US House of Representatives passed the omnibus Consolidated Appropriations Act of 2023 that included a retirement bill titled SECURE Act 2.0.