March Global Commentary
Global equity markets ended 1Q23 on a strong note (MSCI World +3.2% MoM and 7.9% 1Q23/QoQ), the first time we have seen back-to-back positive quarters for equity markets in almost two years. The tech-heavy Nasdaq 100 Index was amongst the best-performing segments of the market in March (+9.5% MoM) and for the quarter (+20.8% QoQ) with mega-cap US tech stocks, the COVID-era winners (and generally amongst last year’s biggest losers) leading the way. Facebook parent Meta, Amazon, Apple, Alphabet, and Microsoft delivered double-digit returns in March.
The solid end to the quarter came despite a mini-banking crisis in March which saw the S&P 500 Banking sub-index drop 19% MoM. In the US, a bank run on mid-sized lenders, Silicon Valley Bank (SVB) and Signature Bank caused their demise, with the former being the second-biggest bank failure in US history. Silvergate, a smaller US lender with links to the crypto industry, also failed. Across the Atlantic, the Swiss National Bank (SNB) forced a consolidation of the country’s two biggest lenders as a series of missteps at Credit Suisse caused a crisis of confidence in the lender that led to deposits of more than US$10bn/day leaving the bank in the days leading up to the mid-March weekend when the SNB enforced the UBS takeover of Credit Suisse.
Central bank intervention staved off further contagion in the banking industry as US Federal Reserve (Fed) Chair Jerome Powell announced a much-anticipated 0.25% rate hike in March. It was accompanied by a message that the US banking system was “sound and resilient”. The European Central Bank (ECB) also kept up its fight against inflation with a 0.5% rate hike last month. Despite the Fed’s best efforts to convince investors that the inflation fight was far from over, the mini-banking crisis spurred investors to start pricing in the probability that the Fed will need to cut rates in 2H23 to support economic activity. As a result, US 10-year government bond yields ended the month 0.5% lower at 3.45%, and the US dollar experienced weakness against most currency pairs (US Dollar Index -2.3% MoM).
In commodity markets, energy commodities struggled with natural gas prices down 19% MoM (the price halved in 1Q23), while the Brent crude oil price fell 5% MoM.
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