First Republic fails, and is snapped up by JPMorgan Chase

 Yet another bank has bit the dust as First Republic has recently been acquired by investment banking powerhouse JP Morgan Chase. Starting May 1st, all First Republic branches will operate as JP Morgan Chase branches. JP Morgan acquired First Republic with the assistance of the Federal Deposit Insurance Corporation (FDIC). The FDIC is also assisting with the acquisition by partially paying for losses on the bank's residential and commercial loans.

Most believed that it would be a matter of time before the small California-based lender collapsed, especially following the recent increases to interest rates and the collapse of Silicon Valley Bank (SVB). Both banks faced issues associated with the lack of depositors not covered by federal deposit insurance. As a result, we saw significant decline in deposit base in the first quarter of 2023 by $72 billion.

Investors had low expectations for First Republic in 2023 especially after the collapse of SVB. In the March, First Republics stock price decline 89 percent. There is some hope for the rest of the banking industry as it appears that no other banks are being significantly impacted by the recent news. It is also beneficial for the industry to see a large bank like JP Morgan step in during time of need. It is still a very concerning time in the market as American regional-bank shares have declined nearly 30 percent. It will be interesting to see future conditions and how the government and large banks will respond. 

Source: First Republic Fails

Oil Stock prices drop due to Growth Concerns

Oil stock prices fell this week due to growing economic concerns from the U.S. and China. The U.S. is thought to be raising interest rates to balance out their somewhat volatile economy post covid, this along with lower-than-expected Chinese manufacturing data has caused concern in the oil field. The FED will make the official oil stock price change as they will be the ones to more than likely increase the United States interest rates. 

The oil industry is actually the third massive U.S. institution to fail in the past couple of months which isn't a great look for our economy worldwide and is starting to show potential weakness. This weakness is also scaring investors as the continuous failure of big institutions and the threat of increasing interest rates are very worrying to many. 

China is experiencing economic problems as well as its manufacturing sector is doing worse than expected. They went from expansionary to contractionary over the past month with a decrease in their PMI or purchasing managers' index. This decrease is also worrying to many and is directly affecting the U.S. as most of our goods are produced by this sector. All of these factors are negatively affecting the U.S. economy and are the reasons for the Oil stock prices decrease.

Article: https://www.msn.com/en-us/money/markets/oil-drops-as-economic-growth-concerns-offset-opec-cuts/ar-AA1aAmZs

How the development of AI can impact our economic system.

With the rise of technology over recent decades, companies and businesses have learned and adjusted with the new information and ways of growth that have been occurring around the world. The newest progression of technology, Artificial Intelligence, is the next wave of technology both in the United States and across the world that can help consumers, businesses, and corporations. AI is so important in the acceleration of the economy because it can help increase the speed at which we are making technological advancements, and are developing entrepreneurial businesses, and the value of corporations. Businesses need to be open to adjustments and advancements within their industry in order to stay up to date on the latest technological updates, in order to stay on top of the needs of the clients, their employees, and their markets. If an organization falls behind and fails to make advancements alongside other competitors within the market, then they are going to be out valued, and absorbed because they now lack efficiency and performance. These companies need to keep in mind that AI can help them reach their goals more effectively, and achieve the growth that they desire, and that it is not there to take over their jobs. This is a growing and developing industry that is going to be very important in the future economy that many businesses and organizations have already started planning for and developing in order to make their organization ass effective and efficient as possible over the coming years.

 https://www.cnbc.com/advertorial/2023/04/25/generative-ai-is-poised-to-change-everything-is-your-company-ready.html?utm_campaign=NativeTout22&utm_source=Polar&mvt=i&mvn=e30a537bfb0740b29fb43fd759cc3159&mvp=NA-CNBC-11239420&mvl=%20%5BNativeThreeUpStackv2%5D

U.S. GDP rose at a 1.1% pace in the first quarter as signs build that the economy is slowing

Overall economic growth has slowed at a large rate within the first 3 months of 2023. This is largely due to covid, but also because of the continuing effects that inflation and high-interest rates have on the economy. On top of that, Gross domestic product (GDP) has risen at a 1.1 percent annualized pace within the first economic quarter - the expected growth was 2 percent. The U.S. Bureau of Economic Analysis also measured the personal consumption expenditures price index, which saw an increase of 4.2 percent, which is half a percent above the estimate of 3.7 percent. If you exclude things like food and energy within the PCE, then it saw an increase of 4.9 percent which is .5 percent more than the previous increase of 4.4 percent. 

Following this report, it was stated that a Citigroup economist named Veronica Clark said “Overall, I think it’s a relatively inflationary report, even though the headline GDP number is a bit softer. All of those signs that demand is still strong and prices are still rising were very much present today.” Although Veronica sees optimism in overall inflation, her expectation is that the U.S. economy will sooner or later tip into a recession. Given the recent Q1 data for 2023, Veronica believes that we will not slip into this recession just yet but is something we should expect and prepare for. 

The recession scare is coming from data that reports slow growth. For example, the economy has seen a decline in private inventory investment, a deceleration in nonresidential fixed investment, and a Gross private domestic investment that fell 12.5 percent. However, things that counteract this recession scare come from an increase in personal consumption expenditures by 3.7 percent and an increase in exports by 4.8 percent. 

Overall, the economy is likely to see itself in a recession within a year and a half to two years. This is simply based on slow growth and the rate of joblessness (3.5% unemployment rate - 230,000 jobless claims).

https://www.cnbc.com/2023/04/27/gdp-q1-2023-.html

Eurozone economy ekes out 0.1% growth in Q1, misses expectations as Germany stagnates

The Euro zone economy grew by a marginal 0.1% in Q1 of 2023, as Germany's GDP remained stagnant over the period. Growth came in below expectations, with a Reuters poll of economists previously forecasting a Q1 growth rate of 0.2%. The annual economic growth was also at 1.3%, a hair under the projected 1.4%. 

The low growth figures come in light of high inflation in Europe, with rising energy prices due to the war in Ukraine being a key driver of inflation, with Carsten Brzeski, global head of macro at ING stating that a bloc-wide recession being averted by a warmer than expected winter along with fiscal stimulus. He further went on to state that there exist significant disparities between individual countries, and that future growth relies heavily on a positive momentum in industry and wage growth, and the possibility of a US recession and a tightening of the monetary policy by the European central bank. 

Germany's economy stagnated in the first quarter of 2023, avoiding a technical recession by a narrow margin, while France's GDP increased by 0.2% despite widespread strikes. Irish GDP declined by 2.7% on the previous quarter, while Portugal's economy grew by 1.6%. The European Central Bank (ECB) meeting on May 4th will closely scrutinize these figures as they seek to tackle headline inflation of 6.9% and core inflation at a record high of 5.7%. Some ECB policymakers have suggested a further interest rate rise may be necessary, but concerns remain about banking sector turmoil and deposit outflows.

Source: Euro zone economy ekes out 0.1% growth in first quarter (cnbc.com)

Regulators Prepare to Seize and Sell First Republic Bank

     This weekend federal regulators led by the FDIC have worked to seize First Republic Bank to stop its collapse and to hopefully finally put a cork in the recent banking crisis. Since First Republic announced that over half of their customers had withdrawn half of their deposits, the bank's stock price has fallen tremendously. However, since the government has seized First Republic Bank, banks like PNC, JPMorgan Chase and the Bank of America have shown interest in buying First Republic and taking on their deposits. This is a very important time when it comes to addressing this banking crisis that is plaguing the country. The government must act in order to save bigger banks from failing and must restore consumers confidence in the country's banking system. Perhaps the government has learned things from the 2008 banking crisis that will benefit us in this new crisis. Hopefully the government will able to get financial institutions to band together with one another as well as the government to ease consumer fears and rid the country of this crisis.

Source: https://www.nytimes.com/2023/04/29/business/first-republic-seizure-fdic.html