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The Federal Reserve is still battling stubbornly high inflation, along with new concerns over the state of the country's financial system. The concerns have sparked global jitters and can ultimately "trump the inflation objective in the very near term," Krishna Guha, Evercore ISI Vice Chair, tells Yahoo Finance. The Fed is trying to "walk and chew gum at the same time," he says. Much of Wall Street remains split on the Fed's next move. The bar for pausing and the bar for cutting are "very, very different," Guha says. "The bar for pausing is not that high," while the bar for cutting is "much higher" on both a qualitative and quantitative sense, Guha explains. "You can pause on the expectation that things are going to move in a more disinflationary direction. But...you're only cutting upon substantial further realized growth in moving toward inflation heading back toward target," he says. "A severe enough episode..could stomp out the Fed's focus on realized inflation progress." You can watch Guha's entire interview with Brad Smith and Julie Hyman here. Key Video Moments 00:00:21: Fed's inflation objective 00:00:47: The bar for pausing vs. cutting
Veteran columnist Joe Nocera says the best way forward for the banking sector is to regulate, regulate, regulate. Nocera joined Julie Hyman and Brad Smith on Yahoo! Finance Live as the Senate's hearing on banking turmoil was underway. He says he was "stunned" by Fed Vice Chair Michael Barr's testimony statement, which says "it is not the job of supervisors to fix the issues identified; it is the job of the bank's senior management and board of directors to fix its problems." The problems present in the banking sector should be addressed, Nocera says, by bringing back the "sensible regulations" originally imposed in the wake of the 2008 financial crisis. Specifically, Nocera mentioned bringing back the stress test for banks, originally introduced under the Dodd-Frank act. The stress test serves as a barometer of how well prepared a bank is to weather uncertain economic conditions. A covered institution must run stress tests on a regular basis, to prove they have sufficient capital to keep afloat under stressful circumstances. Under the Trump Administration, stress test requirements were relaxed significantly; the minimum threshold for banks was raised to $250 billion, and the frequency of tests was reduced across the sector. This allowed smaller banks - like SVB - to slide under the radar. "I think a lot of these problems could have been avoided" had regulations been in place, Nocera says. Key Video Moments: 00:00:25 Bring back the stress test 00:00:36 Reimpose regulations from 2008 00:00:50 Problems could've been avoided if proper regulations had been in place To listen to our full conversation with Joe Nocera, click here.
Blue chip stocks can be an excellent source of stability for your portfolio because they're established companies with recognizable brands and track records of success. During difficult market conditions, blue chip stocks often hold up quite well. In recent weeks, the fall of SVB Financial and Signature Bank have dragged down the entire financial sector.