Recent Bank Failure: What Happened and Why?

This month, we unfortunately had another bank failure brewing. It was announced that First Republic Bank was seized by regulators, and the bulk of the assets were purchased by JPMorgan, thankfully avoiding another major shock to the banking system. This was the largest bank failure since the financial crisis in 2008 and the 2nd largest bank failure ever.  


Impact of Interest Rates on Bank Bonds and Financial Stability

When you own a bond, it has an inverse relationship to interest rates. We’ll explain with an example. If you own a bond that is paying 3%, and interest rates go down to, say, 1%, your bond is more valuable because it’s paying higher than the going rate. If you own a bond that is paying 3%, and interest rates go up to 5%; your bond is less valuable because it’s paying less than the going rate. This latter example is essentially what happened to many banks. Bonds had been paying very low rates since Covid hit in 2020.

In an effort to fight inflation, the Federal Reserve has been raising interest rates. As interest rates increased, the value of the bonds on the balance sheets of banks decreased in value. This doesn’t hurt a bank on paper if they can keep the bonds for the long haul. However, if there is a rumor of financial problems and customers withdraw their deposits, the bonds have to be sold at a discount, and that is the main reason many recent bank failures have occurred.  


Shifting Indicators: What it Could Mean for the Stock Market

For the indexes, this was a mixed month. The Nasdaq and the Aggregate bond index were essentially flat, the Russell 2000 was down 1.86%, and the S&P 500 gained over 1%. We encourage you to review your own statements to see your own performance. 

One of our most important longer-term indicators shifted from negative to positive in late April. It had been negative since the first quarter of 2022, so it was negative for quite a while (Source: While past performance cannot predict future performance, in the past, this type of indicator switch has said brighter days may lie ahead for the stock market in the longer term. A few months back, we had a different indicator say there is a chance we’ll have a recession this year (inverted Yield Curve, Source: We hope that recent improvements in the overall economy, inflation data, and the housing market will provide some stability moving forward.

Our new research handled the volatility relatively well this month, but we’re doing our best not to focus on the short-term results because the research has the potential to work well in the long run. We encourage you to come by the office to go over the new strategy with us in person or over a Zoom call. 


Financial Planning Topics to Discuss with Your Advisor

We’d love to have a review meeting with you to discuss investments, retirement income planning, college planning for kids or grandkids, tax preparation, health insurance, including Medicare supplemental and prescription drug plans, and a variety of other financial planning topics. Please contact our office at (586) 226-2100 to schedule a meeting today!

If you’ve had any changes to your income, job status, marital status, 401K options, address, risk tolerance, or any other financial changes, please contact us right away. We hope you and your family are doing well!


Kenneth Wink

with contributions from Robert Wink, James Wink, Zachary Bachner, and James Baldwin


Ken Wink is the Co-Founder and Chief Compliance Officer of Summit Financial Consulting, LLC. With over two decades of experience in the financial services industry, he is deeply knowledgeable and passionate about explaining complex financial concepts in understandable terms. Ken writes articles geared towards conveying financial topics in clear, straightforward language, making them accessible to everyday people.



Notes & Disclaimer:  Stock market indices, like the S&P 500 Index, are unmanaged groups of securities considered to be representative of the stock market in general or subsets of the market, and their performance is not reflective of the performance of any specific investment. Investments cannot be made directly into an index. Historical returns data are calculated using data provided by sources deemed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness. This information is provided “AS IS” without any warranty of any kind. All historical returns data should be considered hypothetical. Past performance is no guarantee of future results.

This communication is only intended for recipients who reside in states where our agents are licensed to sell these products. Investment advisory services are offered through Summit Financial Consulting, LLC, an SEC registered investment advisor. Registration does not imply a certain level of skill or training. Summit Financial Consulting Investment Advisor Representatives do not render tax, legal, or accounting advice.  Insurance products and services are offered through Summit Financial Consulting, LLC. Note:  Please update Summit Financial Consulting, LLC, if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually. Please consult Summit Financial Consulting for a copy of this document should you need an additional copy. All guarantees are subject to the claims paying ability of the issuing insurance company. Past performance cannot predict future performance. It is not possible to invest directly in an index. The Sherman Group, LLC is not associated with Summit Financial Consulting, LLC in any way, other than a research sharing partnership. Back testing is more heavily scrutinized than any other type of investment analysis because it can be updated to take advantage of past data. The algorithms and trading signals that we receive from the Sherman Group, LLC were created using back testing with the goal of creating a sustainable research process. We have reviewed data from the entire 20 year period which was mostly back tested, and have also personally reviewed the live data for the past 5 years and feel comfortable with it, but we encourage you to meet with us and ask questions so you are fully informed on what we plan to do with your investment assets at TD Ameritrade and eventually Charles Schwab. It is important to look at fees, taxable repercussions, and trading frequency when looking at a rate of return number. There is no perfect system or research feed, and Sherman Group, LLC has had both longer term and short-term periods where they lost money. Investing involves risk, and these portfolios are no exception.