TikTok Goes the Clock

Mar 27, 2023

By Tristan Detzel, Advisory Consultant
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All eyes were on the Federal Open Market Committee last week as they proceeded to raise the federal funds rate by 0.25% to 4.75% – 5.%, continuing with the slower pace set at the February meeting. In light of recent stress across the banking industry, the key question was how this would factor into the Committee’s rate hike decision. Chairman Jerome Powell reaffirmed that the banking system is “sound and resilient” and that “all depositors’ savings and the banking system are safe.” Powell also highlighted that tighter credit conditions are likely to weigh on economic activity and may substitute for one or more rate hikes but was quick to note that the FOMC could reevaluate as the impact of recent events become evident.

Many questions were answered last week with the latest rate hike but there’s still a wide range of possible paths for the funds rate. One would have to imagine that given recent events, the odds of future 50 bp hikes are slim. The question then becomes, when can we expect the Fed to cut rates? Many well-known money managers have been chomping at the bit to predict the next rate cut and it’s likely that Wall Street may be jumping the gun as well. According to CME Group, the bond market has priced in a 74% chance the Fed will cut rates by at least 1.25% by year end. Just a month ago, the market was pricing in just a 0.8% chance of any rate cuts in 2023. Clearly the Fed will cut interest rates once there is consensus that employment and inflation have reached their target, but the lagging nature of the data warrants concern that the data-dependent Fed will find themselves once again between a rock and a hard place as the consequences of waiting too long to loosen policy will certainly throw us into recession.

After two recent U.S. bank failures (SVB, Signature) and the addition of Credit Suisse last week, markets remain on edge waiting to see who’s next to crack under pressure. Despite growing concerns of financial stress spreading across the broader banking system, markets held up for the week as equity markets rallied back on Friday afternoon. As expected, the financial services sector has given up the most ground, driven mostly by smaller regional banks, with the regional bank subsector of the S&P 500 down 31% so far in March alone. Elsewhere, we saw consumer discretionary, technology, and communication services paving the way toward a modestly positive week for equity markets. Take a look under the hood, and you’ll see that GameStop gained 45% on the back of earnings surprise and a re-fueled rally in the meme stock. It was an extremely volatile week across Treasuries as investors weigh the Fed’s interest rate policy outlook and banking system concerns grow. The 10-year Treasury peaked near 3.62% and finished the week lower at 3.37% while the 2-year Treasury peaked at 4.25% and finished near 3.76% as the increasing flows to bonds continue. Measures on bond market volatility remain at levels not seen since the Global Financial Crisis. The Russell 2000 lost 0.32% while the S&P 500 gained 1.22% as investors try to shake off bank fears. With the outlook for a weaker economy moving forward, cyclical investments like small-caps, energy, and materials have lagged recently.

Equities traded lower on Friday morning as Deutsche Bank became the latest name to fall under sizable selling pressure amidst growing concern around European banks as share prices dropped and credit default swaps spiked. Deutsche shares declined by almost 10% but crawled back as German Chancellor Olaf Scholz calmed fears stating that there is “no reason to be concerned” about Deutsche Bank. After the recent fall of Credit Suisse and the resulting buyout from UBS, investors aren’t taking any chances. It seems a bit premature to assume that another leader in the world banking system could collapse, but that’s not to suggest that investors are just crying wolf. Banking stress aside, YTD flows out of equity funds and into money market and bond funds are reflective of growing investor preference for lower risk, yield-bearing assets. Overall, I expect markets will remain turbulent over the coming weeks as the impact from Fed policy transpires amidst a likely continuation of positive and negative macro news.

TikTok is one of the most successful and prolific social media apps in the industry but has been plagued by relentless scrutiny relating to data rights, manipulation, and security concerns. The U.S Government held a hearing this week with TikTok CEO Shou Zi Chew as they continue a push to ban or force a sale of the app in the U.S. The growing concerns over data collection and surveillance of TikTok and its parent company ByteDance has led to further scrutiny from lawmakers. The hearing quickly devolved into a barrage of “yes-or-no” questions from politicians on both sides of the aisle, several of whom appeared uninterested in hearing full responses from the executive. Nevertheless, a verdict from Congress would not only set a precedent for many other social media rivals such as Instagram, YouTube, and Snapchat, but may also lead to a potential buyout opportunity from a forced sale of TikTok in the U.S.

On Friday, we saw February Durable Goods orders decline roughly 1% against consensus expectations for a small increase, while core capital goods orders ticked slightly higher. It’s worth noting that this covers February activity and predates the recent banking stress. Durable goods are a key indicator of both current conditions and future GDP expectations given the nature of the capital commitment. Excluding a 2.8% retreat in transportation, new orders would have been flat in February after a 0.4% increase in January versus expectations for a 0.2% gain.

This week will close out March featuring the February PCE inflation release on Friday.  In addition, we’ll be looking for the regional business sentiment survey from the Richmond Fed Index and the Chicago PMI, as well as final March Consumer Sentiment surveys.

Date Report



Monday 3/27/2023 None scheduled
Tuesday 3/28/2023 Advanced U.S. trade balance in goods


Advanced retail inventories


Advanced wholesale inventories


S&P Case-Shiller home price index (20 cities)



FHFA home price index
U.S. consumer confidence



Wednesday 3/29/2023 Pending U.S. home sales



Thursday 3/30/2023 GDP (2nd Revision)



Initial jobless claims



Continuing jobless claims

1.69 million

Friday 3/31/2023 Personal income (nominal)



Personal spending (nominal)



PCE index


Core PCE index



PCE (year-over-year)


Core PCE (year-over-year)



Chicago Business Barometer



Consumer sentiment (final)




Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Weekly Market Commentary/Market