Wall Street Bulls: Banking Crisis is a Big Problem! Things are about to go Wrong for US Stocks

Tom Lee, co-founder and head of research at US Fundstrat Global Advisors, said in a newly released report that investors should stay away from the US stock market if the current regional banking crisis gets out of hand.
Tom Lee, who has been one of the most optimistic equity strategists on Wall Street, previously set a target price of 4,750 for the S&P 500 at the end of 2023, some 15% higher than current levels. His comments today are truly shocking.
According to the report, Lee's concerns about the impact of the wave of bank failures centre on the idea that government intervention to contain the crisis tends to coincide with an environment of zero risk appetite in the stock market.
If investors feel that the FDIC, the Fed or the White House needs to intervene in the banking system, then the entire stock market becomes untouchable, he once wrote.
Such fears were greatly heightened after the recent bankruptcy of First Republic Bank, which had nearly $230 billion in assets, was taken over by JPMorgan Chase on Sunday after going into FDIC bankruptcy protection. This followed the collapse of Silicon Valley Bank and Signature Bank in mid-March.
In addition, the instability of regional bank stocks was on full display this week, with reports of a possible sale of PacWest Bancorp causing the stock to fall as much as 75% this week. Meanwhile, reports of Western Alliance deal talks (although denied) caused the company's shares to plummet as much as 69%. But shares in both banks recovered lost ground on Friday.
Lee is concerned about the banking crisis and the bad effect it could have on the stock market because of the risks that could permeate if this instability continues.
This raised so many tail risk issues, including the credit crunch, commercial real estate and broader economic impacts, and this is a period when it is difficult to increase risks, according to Lee.