Reinhart Week in Review by Madison Investments 5.5.2023


This week, the Federal Reserve raised interest rates by 25 basis points (bps) to a target range of 5.0% - 5.25%. According to the Fed statement, job gains “have been robust” and the unemployment rate remains low while inflation remains “elevated.” Interestingly, the statement no longer anticipates that additional rate hikes may be necessary, but rather states the committee will consider various factors “in determining the extent to which additional policy firming may be appropriate.”

Our Take: After raising rates a cumulative 5% in just over a year, we may be approaching levels the Fed considers “sufficiently restrictive.” From here, the path forward is less clear. The Fed appears willing to assess incoming data and market conditions when deciding its next policy move.


Nonfarm payrolls increased by 253,000 jobs in April. The previous two months’ reports were revised lower by a combined 149,000 jobs. The unemployment rate fell to 3.4% while labor force participation was unchanged. Average hourly earnings rose 0.5% in April and have risen 4.4% over the last twelve months.

Our Take: The employment report was solid. The economy continues to add jobs and the unemployment rate, which was expected to rise this month, continues to fall. Also, earnings are increasing at a rate faster than the Fed would likely prefer. Market expectations for the next Fed move to be a rate cut may be misguided if the employment picture remains strong.


JP Morgan acquired the assets and assumed the deposits of First Republic Bank in an FDIC-coordinated transaction. This transaction will see the FDIC’s insurance fund pay about $15 billion to pay back loans to the Fed and the Federal Home Loan Bank (FHLB), and First Republic’s other debtholders and shareholders will be wiped out. Following this transaction, the shares and credit spreads of many regional banks came under significant pressure. Later in the week share prices partially rebounded, and several banks indicated that they have not seen deposit outflows.


Our Take: Any bank relies on the trust and confidence of its depositors. This confidence was shaken at many smaller banks following the collapse of Silicon Valley Bank, and First Republic depositors were rightly concerned about the safety of their funds. The Fed has taken actions to provide liquidity to banks, and for fundamentally sound banks these actions seem to have stabilized deposits and avoided wider bank failures. While stock prices have moved wildly based on rumors, depositors seem to have stayed put for the time being.


The ECB raised rates by 25 bps to 3.25% which was a slower rate of increase than the preceding hikes. Christine Lagarde, President of the ECB, emphasized that the slowdown does not indicate a pause is imminent, stating that “we have more ground to cover.”

Our Take: The ECB has been slightly behind the Fed in tightening monetary policy to address inflation. The commitment not to pause indicates that the ECB will likely catch up to the Fed this year.


The Las Vegas Convention and Visitors Authority released March statistics that indicated that tourism in the city has nearly reached pre-pandemic levels. The report showed that 3.7 million people visited Las Vegas in March, which is an increase of 9.6% compared to March 2022 and only 1.1% lower than March 2019. Hotel occupancy for the month reached close to 86% midweek and 94.5% for the weekend.

Our Take: Las Vegas is seen as a benchmark for pandemic recovery, as leisure travel and business travel are captured by tourism and convention numbers. Las Vegas hosted many marquee events in March including two Taylor Swift concerts, a NASCAR race, college basketball games and a large trade show. The March numbers should be viewed as a positive for the city, which struggled to rebound from the effects of the pandemic.

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This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Although the information in this report has been obtained from sources that the firm believes to be reliable, we do not guarantee its accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

A basis point is one hundredth of a percent.