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A survey of 71 banks in the Dallas Fed district done after SVB went under shows a dramatic reversal in loan volumes, see chart below. This Fed survey was carried out from March 21 to 29.
Source: Banking Conditions Survey, Federal Reserve Bank of Dallas, Apollo Chief Economist. Note: Data collected March 21–29, and 71 banks and credit unions headquartered in the Eleventh Federal Reserve District responded to the survey. See important disclaimers at the bottom of the page.
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The US Treasury publishes daily data for tax refunds, and the level of tax refunds to households tells us something about how much support there is to consumer spending, and the chart below shows that tax refunds in recent weeks have been running at a lower rate in 2023 than in previous years. Adjusting for inflation would lower the 2023 numbers even further.
Source: US Treasury, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The rally in the S&P500 since the beginning of the year has been driven by 20 stocks, the market cap of the remaining 480 stocks has basically not gone up, see chart below.
The implication for investors is that this market is not driven by broad-based higher growth expectations but instead by what has happened with rates, in particular after SVB went under.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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European inflation is likely to move sharply lower over the coming months, see chart below.
Source: European Commission, Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Our weekly banking sector chart book is available here, key charts below:
1.) Since the Fed started hiking rates, deposits in banks have declined by $800bn, and assets in money market accounts have increased by $600bn, see the first two charts below.
2.) The share of households using mobile banking or online banking increased from 39% in 2013 to 66% in 2021, which has made it possible to move money in and out of bank accounts more quickly, see the third chart.
3.) Capital markets, including IG issuance and HY issuance, have, over the past week, started to slowly come back, see the fourth and fifth charts, but stresses remain in bank funding markets with the FRA-OIS spread still elevated, see the sixth chart.
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist. Note: March data as of March 22, 2023. Peak is defined as the month before monthly outflows turn negative. 
Source: FRB, ICI, Bloomberg, Apollo Chief Economist 
Source: FDIC, Apollo Chief Economist. Note: The data shows the sum of households using mobile and online banking, some respondents may use both. 
Source: Pitchbook LCD, S&P Capital IQ, Bloomberg, Apollo Chief Economist. (Note: Jan-Feb number is the average of the sum of those two months.) 
Source: Bloomberg, Apollo Chief Economist. Note: Data from NIM <GO>, IG excludes government and financials issuance. 
Source: Bloomberg. Note: Ticker used is USFOSC1 BGN Currency. As of March 31, 2023. See important disclaimers at the bottom of the page.
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The interest rate-sensitive components of GDP, such as business spending, have been slowing down because of Fed hikes, and adding a banking crisis with tighter bank lending standards is magnifying the downside risks, see chart below. Remember, there was already a debate in markets about a recession coming even before the banking crisis started.
Source: Census Bureau, Bloomberg, Apollo Chief Economist. Note: Capex spending is real capital goods orders and nondefense ex-aircraft deflated by private capital equipment PPI. See important disclaimers at the bottom of the page.
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With hiring in the service sector and layoffs in the tech sector, jobless claims may underestimate the ongoing slowdown in the labor market because only 14% of unemployed receive unemployment insurance benefits, see chart below. In other words, with a strong service sector and a weak tech sector, jobless claims may not be a good reflection of what is happening in the labor market.
Source: BLS, Apollo Chief Economist. Note: Among unemployed persons who had worked in the past 12 months. BLS link here: https://www.bls.gov/news.release/uisup.t01.htm See important disclaimers at the bottom of the page.
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It is difficult to assess the duration of this banking crisis but assuming IG credit spreads stay at their current level around 150bps, VIX is two standard deviations higher than normal, and the Fed funds rate is 150bps higher because of tighter credit conditions, show how serious this shock can be if bank funding costs remain elevated and banks tighten lending standards over the coming quarters, see chart below.
The negative impact on GDP at around 1.25% would be only a third of the roughly 4% decline in GDP during the 2008 financial crisis, and to be sure, this quantification shows the impact on GDP if the current levels of stress continue.
But under the baseline assumption of growth already slowing because of the lagged effects of Fed hikes, the bottom line is that if the ongoing banking crisis results in tighter bank lending standards over the coming quarters, it increases the risks of a harder landing.
Source: Bloomberg, Apollo Chief Economist. Note: The chart shows difference in baseline forecast adding a 150bps shock to Fed funds rate and 30 bps to credit risk and a two standard deviation shock to VIX, all starting in 1Q23. VIX is currently two standard deviations from its mean since 2010. See important disclaimers at the bottom of the page.
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At the peak in 2013, China held $1.3trn in US Treasuries. Today they hold $850bn, and the selling has accelerated over the past two years, see chart below.
Source: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Both survey-based and market-based measures of inflation expectations are falling quickly, and the Fed will soon be talking about this as an important reason why they can allow themselves to be more dovish and ultimately start cutting rates, see chart below.
Source: FRBNY, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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