Ouch! This was a difficult month. It was the month when the bear market took hold as we moved from the jingly janglies to abject panic and buyers quickly became sellers. While most equity markets recovered their losses, for long periods, they teetered on the brink, as first Silicon Valley Bank (SVB) collapsed, a bank few had heard of, but then Credit Suisse followed, a very different beast with genuine concerns about contagion as AT1 bondholders were wiped out.
The aftermath saw global stocks lose billions of dollars, in banking and more leveraged sectors. Not long ago, this environment would have seen the VIX head back up to 30, yet it closed the month under 19, just above its long-term average.
It was a stalemate in Ukraine, with plenty of verbal sparring between the West and Putin, who was wining and dining his new BF, President Xi Jinping. But the Russian push into Bakhmut appeared to have stalled, and now there are increasing signs that Ukraine is gearing up for a spring offensive.
Inflation remains sticky. Although the overall picture is one of falling inflation, it is slow, although this may be changing, with the latest Eurozone inflation dropping sharply to 6.9% as lower energy costs feed through to supply chains. The UK remains the G7 laggard, with inflation at 10.4% to the end of February, while French inflation sits at 7.3%, German 7.4%, Italian 9.1%, Japan 4.2%, US 6.0% and Canada 5.2%.
Most observers still believe some form of global recession is on the cards this year as growth continues to falter. Somehow the UK escaped by the skin of its teeth in 2022, with recently revised upward economic growth of 0.1% for the final quarter of 2022, following a contraction of 0.2% in the third quarter.
The US economy still looks reasonably robust, with GDP numbers showing the economy grew at 2.6% in the fourth quarter of last year. However, Allianz is more bearish, forecasting a technical recession for the US in the second half of this year as tighter credit conditions filter through to the market.
For central bankers, these are times when they earn their keep. The Fed's Powell early hawkish comments went down very badly when he said that the Fed had yet to cool the economy and would ramp up rate rises - two year Treasury hit 5% for the first time since 2007. The collapse of SVB then came out of left field, although the more you read about the bank's failings, the more it shouldn't have been a surprise. Then it was all over for Credit Suisse as its largest investor refused to bail it out, news that resulted in an immediate 20% drop in share price and ultimately a cut-price deal to UBS as AT1s were written down to zero.
With market confidence so fragile, it is now questionable whether or not global rates can continue to rise at this trajectory, given the high chance of further failures. Yet this didn't deter the Fed, ECB and BoE from raising rates during the month, although the market now believes that this is now the beginning of the end…
In this environment, most equity markets remarkably closed up. Multiple selloffs marked the month as markets sold financials and moved to risk-off, but there was also a growing appreciation that the Fed may be for turning sooner than anticipated. By the end of the month, the S&P 500 closed up 3.5% and the Nasdaq up 6.7%, as tech stocks came back - Alphabet up 14.6% and Amazon up 9.9%. Concerns surrounding financials and more depressed commodity stocks weighed on the FTSE 100, which closed the month down 3.1%. While the Dax was up 1.7% and Nikkei 225 up 2.1%.
The Bloomberg Commodity Index hardly moved during the month, down 0.2%. The biggest move in this space was natural gas, falling 26%, while oil appeared to follow the economic winds, with WTI and Brent down 1.6% and 5%. Unsuprisingly, Andurand and Goldman have been talking and writing about the return to $150 oil, but this feels a long way off as the markets price in a long-term slowdown. Gold and silver bounced back as markets became increasingly defensive, with gold up 7.7% - briefly breaching $2,000 - and silver up 15.3%.
This month, crypto was the place to be as investors moved away from more traditional assets. Bitcoin once more broke through $28,000 to close the month just shy of $28,500, a plus 20% month - this was all the more impressive given the regulatory difficulties faced by Binance.
March was a month of falling USD. GBP has been the best-performing currency this year, albeit starting from a low base and is back up to 1.23 against the USD. The EUR likewise is back up 1.09.