Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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March market performance: It’s no April fools’ – we're (almost) back in green
Market Rewind
Søren Otto Simonsen
Senior Investment Editor
Summary: The transition from March to April is a time for lighthearted and playful jokes and pranks, making people second guess what’s real or not. Judging by the volatility and turmoil following the collapse of Silicon Valley Bank, one would be easy to disregard what I’m about to write as an April fools’ joke, but data shows that global financial markets ended March with positive returns. It is also the fifth month in a row that global performance has switched back and forth between positive and negative numbers.
The global equity market climbed by 2.8% in March, which may seem counterintuitive seeing as we’ve added a new crisis to the history books: the bank crisis of 2023. Whether that’s a bygone threat or the sign of more to come is being debated heavily in financial circles. With the positive returns for March, it seems as though the financial market – as a global entity – views it, at the very least, as something that can halt future interest rate increases by the leading central banks, which in turn will be good for businesses access to finance and thereby the equity markets.
US 3.5%
The US region was the best performing in March, with a positive return of 3.5%. While the bank crisis began on the country’s west coast, the supportive actions of the government and central bank led to a positive market environment. Especially coupled with the belief that a struggling financial sector is going to lead to fewer and smaller interest rate increases before the rate has peaked and is moving down again.
Europe –0.5%.
The European region was the only one in minus for March. Europe is dealing with the uncertainty of whether the Credit Suisse debacle will lead to a larger crisis in the region’s financial industry, which has most recently led to Deutsche Bank having to answer for itself and its operations. Simultaneously, the region is experiencing civil disturbance with strikes in France, the UK and in other countries, while trying to balance green transformation and ramp up defence spending as a counter to Russia’s invasion of Ukraine.
Asia 2.6%, Emerging Markets 2.7%.
Asia and Emerging Markets posted good performance, mainly driven by Chinese activity picking up after the reopening of the economy seemed to aid the economic recovery in the country.
Information technology and communication services posted returns of 10 and 8.9 percent respectively and ended as the best performing sectors in March. One reason for that could be that they are – at least traditionally – some of the more rate-sensitive sectors, and thus the outlook of potentially fewer interest rate increases than expected will be appreciated. Unsurprisingly, the financial sector ended up as the worst performing, falling more than eight percent in March due to the bank crisis, followed by real estate and energy.
Bonds, both sovereign and corporate, posted positive returns in this infographic. On one hand, rates keep increasing and on the other, more investors seem to have rejoiced with the asset class as an investment object, meaning that demand may have increased for interest-bearing products like bonds.
Check out the rest of this month’s performance figures here:
Sources: Bloomberg & Saxo Group
Global equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific and EM respectively. Equity sectors are measured using the MSCI World/[Sector] indices, e.g., MSCI World/Energy. Bonds are measured using the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st 'CL' Future). Gold is measured using the Gold spot dollar price per Ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK and CHF. Unless otherwise specified, figures are in local currencies.
Global equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific and EM respectively. Equity sectors are measured using the MSCI World/[Sector] indices, e.g., MSCI World/Energy. Bonds are measured using the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st 'CL' Future). Gold is measured using the Gold spot dollar price per Ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK and CHF. Unless otherwise specified, figures are in local currencies.
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