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Has the Long-Awaited Recedive Arrived?

Has the Long-Awaited Recedive Arrived?

Stock markets are dropping, oil prices dropped to levels never seen since 2021, while gold is trending higher. These are the signs that you would expect from a recession. Not only did the stock prices of the three US banks, Credit Suisse, and two others fall to new lows, but they also experienced the largest ever drop in their stock prices. It’s not surprising at all that the market is having jitters. We need to ask ourselves if this is a temporary problem or if we can expect things to get worse.

The contagion issue

There has been a lot of talk in the media of “contagion”. It means that there’s a problem in SVB that spreads to other banks, leading to problems. This can cause a cascading effect. Regulators have come out to repeatedly assure the market that there isn’t any “contagion” risk.

The problem with this is that it could lead people to think that a company which doesn’t have investments in SVB (or any of the other banks in trouble), then it’s safe. There is no way to spread contagion. While that certainly is a concern, it’s also possible for other bank or businesses to be in trouble without a direct link to one of the banks that recently went under.

It’s the tip of an iceberg, or just a…

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