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​​Video: How to React When Banks Fail

Brad Neuman's Photo

Brad Neuman, CFA;

Senior Vice President
Director of Market Strategy

In this video, Alger Director of Market Strategy, Brad Neuman, CFA, discusses recent bank failures and the possible impact on the overall economy.

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In this video, Alger Director of Market Strategy, Brad Neuman, CFA, discusses recent bank failures and the possible impact on the overall economy.

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BRAD NEUMAN: ​​​After the wild events of the past week, some concerned investors are asking: how do the recent bank failures fit into the broader macroeconomic picture? 

Well, for a while now, we have been saying that there may be a dramatic change in macro conditions and markets. We believe that last year was about valuation risk and this year, in our view, will be about earnings risk. In such an environment, we believe more cyclical areas of the market like bank stocks, and value stocks generally, will see their fundamentals weaken. 

It appears to us that there is a correlation between money supply growth and bank deposits. Now, with the money supply declining for the first time since 1938, we believe some bank deposits will be under pressure.

The implications of this and the recent bank failures, in our view, are likely to be more competition for bank deposits, squeezing net interest margins and hurting earnings for much of the banking industry, which is primarily in the value camp, given it has more than 40x the weighting in the Russell 3000 Value as compared to the Russell 3000 Growth.  

In general, we believe the bank failures and the new Federal Reserve Bank Term Funding Program should reduce bank lending activity and weigh on the economy. However, in our view, growth stock earnings, may remain resilient, just as they have in the previous three recessions, registering nearly 1/3 of a peak-to-trough decline as compared to value stocks over those same periods. 

So, what’s our playbook to survive future crises and thrive after the tightening cycle is behind us? We believe avoiding highly levered companies and those who aren’t likely to be in control of their own financial destiny and sticking with those that may gain market share within the economy.

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The views expressed are the views of Fred Alger Management, LLC (FAM) and its affiliates as of March 2023. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities. Holdings and sector allocations are subject to change. 

Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Local, regional or global events such as environmental or natural disasters, war, terrorism, pandemics, outbreaks of infectious diseases and similar public health threats, recessions, or other events could have a significant impact on investments. Active trading may increase transaction costs, brokerage commissions, and taxes, which can lower the return on investment. Past performance is not indicative of future performance. 

Important Information for US Investors: This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund and ETF shares. Fred Alger & Company, LLC serves as distributor of the Alger mutual funds.

Important Information for UK and EU Investors: This material is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations). It is for information purposes only and has been prepared and is made available for the benefit investors. This material does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this material and should be satisfied in doing so that there is no breach of local legislation or regulation.

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Alger Management, Ltd. (company house number 8634056, domiciled at 78 Brook Street, London W1K 5EF, UK) is authorised and regulated by the Financial Conduct Authority, for the distribution of regulated financial products and services. FAM and/or Weatherbie Capital, LLC, U.S. registered investment advisors, serve as sub-portfolio manager to financial products distributed by Alger Management, Ltd.

Alger Group Holdings, LLC (parent company of FAM and Alger Management, Ltd.), FAM, and Fred Alger & Company, LLC are not an authorized persons for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”) and this material has not been approved by an authorized person for the purposes of Section 21(2)(b) of the FSMA.

Important information for Investors in Israel: This material is provided in Israel only to investors of the type listed in the first schedule of the Securities Law, 1968 (the "Securities Law") and the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 1995. The Fund units will not be sold to investors who are not of the type listed in the first schedule of the Securities Law.

Russell 3000 Value Index is a market-capitalization weighted equity index maintained by the Russell Investment Group and based on the Russell 3000 Index, which measures how U.S. stocks in the equity value segment perform by including only value stocks. The Russell 3000 Growth Index is a market capitalization-weighted index based on the Russell 3000 index. The Russell 3000 Growth Index includes companies that display signs of above-average growth. The index is used to provide a gauge of the performance of growth stocks in the United States. The Russell 3000 Index is a market-capitalization-weighted equity index maintained by FTSE Russell that provides exposure to the entire U.S. stock market. The index tracks the performance of the 3,000 largest U.S.-traded stocks, which represent about 97% of all U.S.-incorporated equity securities. 

Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication.

Alger pays compensation to third party marketers to sell various strategies to prospective investors.

Fred Alger & Company, LLC 100 Pearl Street, New York, NY 10004 / 800.223.3810 / www.alger.com




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Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment. Specifically:

You may have to pay more money to trade the ETF’s shares. This ETF will provide less information to traders, who tend to charge more for trades when they have less information.

The price you pay to buy ETF shares on an exchange may not match the value of the ETF’s portfolio. The same is true when you sell shares. These price differences may be greater for this ETF compared to other ETFs because it provides less information to traders.

These additional risks may be even greater in bad or uncertain market conditions.

The differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF confidential, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF’s performance. If other traders are able to copy or predict the ETF’s investment strategy, however, this may hurt the ETF’s performance. For additional information regarding the unique attributes and risks of this ETF, please refer to the prospectus.
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