Don’t Waste Time Stressing First Republic

May 1, 2023  |  Michael Reilly

The failure of First Republic Bank is grabbing everyone’s attention.

And why not – after all, it’s the third such failure this year, following the collapse of Silicon Valley and Signature Bank in early March.

This morning, we woke to the news that JPMorgan Chase announced they have agreed to acquire the troubled institution.

That’s all very interesting – and I don’t want to understate the implications of this news across the banking sector.

In fact, I could write volumes on the need for stability in our banking system and investor confidence in the system.

However, in the grand scheme of things, the failure of a bank worth less than one billion dollars does more to shake confidence than it does to shake markets.

First Republic’s demise, although regrettable, has little real impact when we’re talking about market cap.

As an investor, one has to be careful not to get caught up in the boldest headlines that will take your attention away from what is actually important.

Stay focused.

Companies with market caps under a billion dollars are not market movers.

If one fails, it is very unlikely to have a significant lasting impact on the broader market.

My advice: Focus on companies with significant market caps – the companies that move markets.

Think about this…

While First Republic’s market cap is less than one billion dollars, Microsoft (MSFT) saw its market cap jump more than $140 Billion dollars overnight (Wednesday) after announcing blowout earnings.

That kind of news moves markets.

How mega-cap giants like Microsoft are doing matters, not so much a billion-dollar bank that will be a footnote in a few years.

I’ll talk more about important markets, rates, and themes later this week when we release May’s Month in Review Video.

We’re putting together the final images to help you visualize important market themes, so stay tuned!

If you’d like to talk more about how we can help you navigate the markets with ease in the meantime, schedule a free 1-hour consultation with one of our advisors.

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