March 2023 - Global markets rise despite the spectre of 2008

At the start of the month, testimony by Jerome Powell, chair of the U.S. Federal Reserve (Fed), gave the markets a reality check with further hawkish rhetoric that revived fears of a recession. He acknowledged that the U.S. economy continued to perform remarkably well and reiterated that the Fed was prepared to accelerate the pace of interest rate hikes if inflation did not come down.

A few days later, the U.S. regional bank Silicon Valley Bank failed as a result of its inability to cover surging withdrawals. What came next was a financial sector debacle on the world’s major stock exchanges amid renewed uncertainty and fears of a crisis similar to that of 2008. These concerns gradually eased, however, as political leaders took steps to avoid the risk of contagion. Even so, the Fed steadfastly raised its key interest rate by 25 basis points at the end of the month. That being said, it was cautious in its commentary, citing factors such as the rate hikes’ impact on economic growth as well as the situation of U.S. regional banks, indicating that the tightening cycle might be coming to an end.

Sources : Banque du Canada, Fundata

Le marché canadien a enregistré un rendement de -0,2 % au mois de mars, comme mesuré par l’indice S&P/TSX Composite. Celui-ci a particulièrement souffert de performance négative du secteur de la finance, qui représente environ 30 % de l’indice. D’un point de vue positif, les secteurs des matériaux et des technologies de l’information ont le plus contribué à la performance. 

Le marché obligataire canadien a quant à lui enregistré un rendement positif au cours de la période. En effet, l’indice des obligations universelles FTSE Canada a terminé le mois avec une performance de 2,2 %.

Despite the many events affecting the U.S. market, the S &P 500 Index ended March with a gain of 3.7% in U.S. dollars and 3.1% in Canadian currency. Unsurprisingly, Financials detracted the most from the return while Information Technology and Communication Services recorded the largest gains, driven by U.S. Big Tech.

The situation was similar on the European market, where the decline in Financials was offset by the positive performance of Health Care and Consumer Staples. The MSCI Europe Index returned 0.3% in local currencies. The strength of the euro and the pound sterling during the month increased the gains, such that the return was 1.9% for Canadian investors. 

The Asian market saw positive contributions by most sectors of the economy, although it was not immune to the ups and downs affecting Financials. Strong performances by Information Technology, Communication Services and Consumer Discretionary helped the MSCI All Country Asia Pacific Index end the month with a gain of 2.2% in local currencies and 2.6% in Canadian dollars.

Emerging markets also ended the month in positive territory. The MSCI Emerging Markets Index returned 2.2% in local currencies and 2.5% in Canadian dollars. From the regional standpoint, emerging Asia, including China, South Korea and Taiwan, contributed the most to the return, while Brazil and the United Arab Emirates were the main detractors. The Financials sector ended the month lower, just as it did on the other stock markets.