__Affordable EV race…__ __Volkswagen__ plans to [spend](https://www.cnbc.com/2023/03/14/volkswagen-announces-five-year-193-billion-investment-plan-as-electrification-gathers-pace.html) $126B+ on "electrification and digitization" as it pushes to grow its EV market share. The German auto powerhouse rolled out its design for a $26K EV set for release in 2025. The race toward less pricey EVs reflects growing competition for electric market share. __Tesla__ has slashed prices several times this year and said it'll cut future EV production costs by half. Tesla risks getting passed, and not just by Volkswagen: Chinese startup __XPeng__ launched two EVs in Europe that are priced below Teslas. 

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__Banking’s no good, very bad week…__ Global bank stocks were on a roller coaster last week after the collapse of __Silicon Valley Bank__, which serviced about half of America’s venture-backed tech companies. A [high-level recap](https://snacks.robinhood.com/newsletters/5AtBujCpd8XgLHLBe7atvu/articles/7zPyo6DswDCVfx1kuMG7Ja/) of the second-largest bank failure in US history: when interest rates were ultralow, SVB invested most of its deposits into US Treasury bonds with long durations (think: 10+ years) to earn slightly higher interest. But when interest rates soared, the value of SVB’s old bonds plunged by $15B and its tight-knit VC customers all tried to pull their money out at once (spoiler: it couldn’t meet their requests). 

__Not-so-balanced sheets…__ Swiftly rising interest rates have led to two main problems for banks that failed to properly factor in this risk: (1) the value of their assets (think: bonds, loans, investments) fell as rates rose, and (2) customers withdrew more idle cash from their accounts in favor of higher-interest investments. After SVB’s fall, regional banks’ financial stability has come under scrutiny as traders and depositors look to identify banks with similar balance-sheet risks. Think: a high rate of uninsured deposits (accounts over the FDIC-insured $250K) and bonds with a long time to maturity. __First Republic__ had the third-[highest](https://www.insiderintelligence.com/content/first-republic-bank-stays-afloat-digitally-fueled-fear-rocks-banking-industry) rate of uninsured deposits among US banks, after SVB and __Signature Bank__. Now it’s in the spotlight. 

- __Initially:__ After the collapse of SVB and Signature, regulators announced an emergency backstop to ensure that depositors at both banks had access to all their funds. But…
- __Monday:__ First Republic stock sank a record 60%+, even after assuring depositors that it had $70B in liquidity thanks to backing from __JPMorgan__ and the Fed.
- __Thursday:__ 11 big banks pledged to inject $30B into First Republic, boosting the stock. But by Friday the rebound lost steam, with First Republic shares falling another 33%. 
- __Meanwhile:__ __Credit Suisse__ secured a $54B lifeline from the Swiss National Bank, and on Sunday UBS agreed to buy its struggling rival for $3.2B. 

__Panic can be a self-fulfilling prophecy…__ which is why governments are taking extraordinary measures to contain the damage. Treasury Secretary Janet Yellen said the US banking system “remains sound,” and President Biden pledged to do “whatever needed” to ensure America's banking-system confidence. Last week 68% of US consumers said they still had a fair amount of confidence in banks. Still, Yellen [said](https://www.cnbc.com/2023/03/16/svb-signature-bank-failures-yellen-says-us-banking-system-is-stable-and-deposits-remain-safe.html) that the government would not refund uninsured deposits for every single bank that fails (only those that would pose a systemic risk if they failed). Most Americans don’t have over $250K in individual bank accounts anyway, but many companies do. 

Banking jitters spread (Nancy Lane/Getty Images)

Edge

__It could go a few ways…__ US banks were sitting on $620B in unrealized losses (think: assets that’ve lost value but haven’t been sold) at the end of 2022. If people identify more poor risk management at small banks, it could lead to cratering trust in regional banking or more regulation for smaller banks. “Too big to fail” banks (like: __JPMorgan Chase__, __Bank of America__, and __Citi__) are already seeing spikes in new deposits. The crisis could also compel the Fed to cool on rate hikes.

Regional bank stocks plunge as regulators (and big banks) rush to limit contagion

__J. Pow needs an herbal tea…__ Between bank collapses and new inflation data, a lot’s happened recently that could influence the Fed’s important rate-hike decision this Wednesday. Some investors expect the banking crisis could pressure the Fed to cool on rate hikes (which contributed to banking woes). Most traders predict a hike of 25 basis points, down from 50 last week. Some firms even expect Powell will pause hikes (#Pow-se). While inflation isn’t cooling as fast as the Fed hoped, __Goldman Sachs__ said it no longer expects a hike on Wednesday.

__China's tech scene checks in…__ WeChat owner __Tencent__ (also the world’s biggest gaming company) and ecomm giant __Pinduoduo__ are set to report. The tech titans’ earnings come as China’s economy reopens after years of strict Covid policy. Meanwhile, China's tech world could be on the verge of an AI-powered shakeup. Both Tencent and __Alibaba Group__ (the __Amazon__ of China) are reportedly working on ChatGPT rivals. Meanwhile, __Baidu__ (the __Google__ of China) disappointed investors last week with its AI-chatbot demo. 

Events

Coming up this week

- __[TikBan](https://snacks.robinhood.com/newsletters/20cy8V96PfEU6UKh8gt8ZF/articles/4aHj2SGTicN7e8FGVMqGwi/):__ Biden threatened to ban __TikTok__ in the US unless it separates itself from its Chinese parent, __ByteDance__. Meta, Snap, and Google shares surged on the potential demise of their social rival. 
- __[Metout](https://snacks.robinhood.com/newsletters/2ks7eKM2OFTCzODpqYx8b6/articles/4nayOBAZ6zxuYmVl2qAuyb/):__ __Meta__ is ending its ambitious NFT push just as digital collectibles start regaining relevance. It’s the latest example of Meta’s bad trend timing, which includes its massive metaverse investment. 
- __[Resort](https://snacks.robinhood.com/newsletters/5AtBujCpd8XgLHLBe7atvu/articles/7zPyo6DswDCVfx1kuMG7Ja/):__ Within the span of a month, Silicon Valley Bank went from hosting a summit at a fancy ski resort to reaching out to lenders of last resort. Check out our recap of the bank’s swift demise. 

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