Matt Stucky, senior portfolio manager with Northwestern Mutual Wealth Management Co., joined Cheddar News to discuss Tuesday's trading session as the market digests SVB's collapse and as well as a key inflation report.

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Joining me now is Matt Stucky Senior Portfolio Manager of Equities at Northwestern Mutual Wealth Management. Matt, great to have you on the show today. So many questions out there. So let's start by making sense of this market. Why are stocks up today? Well, thanks for having me, Chris. And you know, I would say that it's a volatile backdrop in both directions and with some stabilization and performing strength in the regional banks which were, you know, really under pressure the last few days, I think it's just a market wide kind of a relief rally taking place today, but you know, just one day doesn't make a market. We probably think that there's more volatility in front of us. Uh So we all need to stay tuned. Okay. So what would you advise Matt investors do with their money in this scenario amid so much uncertainty? Well, I I think that investors are reminded again here just in the last week about the importance of diversification, not having concentration your portfolio to an industry like regional banks or another industry. Um That might have problems like that. We've we've seen that throughout history, that concentration of wealth can at times lead to some disastrous results. And so I think the lesson from this past week is diversification. But You know what we're also telling clients is that, you know, bonds offer, you know, real diversification hedge against equities here. Um you know, we go back to last year. Bonds didn't offer a whole lot of, of, of preservation to uh kind of downside we saw against equities. But the story is different in, in 2023 because yields are substantially higher. Uh And so for our clients, we've increased our fixed income allocations and so far this year is working out much better in terms of in the balance to our clients portfolios. Okay. Um Another question that I have, Matt is what should the fed do next week? I think traders Prices in still a 25 basis-point rate rise a quarter of a percentage point. We haven't heard anything dramatically different from the Fed Chair. So I think that that would be an accurate guess or prediction at least for now, but we know a lot could change in these next seven days. Yeah, the Feds gonna want to continue to keep hiking interest rates. And I think with the announcement with the facility that they put in place to cover deposits over the F D I C limit, they're trying to ring fence the monetary policy that the economy needs to get inflation back to their desired levels separate from the regulation and ongoing supervision of the banking system. You know, time will tell whether they'll be able to effectively separate the two. But, you know, I think it was designed over over the weekend to try and give them that flexibility to run monetary policy separate from, from the ongoing supervision of regional banks. Um you know, we did see, you know, just a dramatic re pricing of the terminal rate expectations over the last few days. And just today, you saw an additional hike, um kind of be restored for next week in the form of 25 basis points and we think it's going to happen. But beyond that, you know, we're gonna get a lot more inflation and employment reports between now in the, in the following FOMC meeting beyond March and, you know, it's, it's really up in the air from, from there. If the fed is going to keep going. Another question that I have. Matt is what are the chances that we could see another banking collapse? Yeah, I think that's fairly remote. Um, you know, just overall, I would say that the banking system is far better capitalized today versus where we were coming out of the financial crisis. But I do think that if we're looking at kind of moving past this, this ongoing issue with the regional banks and, and think about what's the most likely outcome, I think the most likely outcome is depositors trying to rethink the amount and level and rate of return that they get on their existing deposits at banks across the country. Um You know, there is a real incentive to move money away from deposits into higher yielding securities with similar duration. So, you know, for example, three month treasurys yield today about 4.75%. That's far higher than what you're likely to see in any banks checking or savings account. Um you know, besides just the online banks. Um, so, you know, I think it is a little bit of a wake up call to depositors across the country that, um, you know, there are better returns out there and, you know, it might not make sense to have capital out of bank above the F D I C limit if, if there are better investment alternatives. All right, Matt, thanks so much for joining today. A lot of good questions and topics that we cover. That's Matt Stucky, Senior Portfolio manager of Equities at Northwestern Mutual Wealth Management.