The World Equities Index gained 2.4% in local currencies and 0.6% in euro.
US equities outperformed other regions by a wide margin. The S&P 500 rose by 3.6% in USD. This good result was achieved thanks to growth stocks. The IT sector, in which Apple, Microsoft and Nvidia represent 55%, surged by 10.2%. Communications Services, a sector dominated by Alphabet and Meta Platforms, gained 4.6%. The Nasdaq 100 Index surged by 9.5%.
Value stocks lagged significantly. First and foremost, bank stocks fell as a mini-crisis unfolded in the sector. In the US, Silicon Valley Bank and Signature Bank, respectively the 15 and 19th largest banks in the country, faced severe liquidity issues had to stop their operations. Control of those banks was taken over by the Federal Deposit Insurance Corporation. In Europe, Credit Suisse faced huge withdrawals and the Swiss authorities brokered a rescue deal with UBS. Shareholders lost (almost) everything but deposits were protected. The energy and mining sectors also performed negatively in March, and so did real estate.
The Emerging Markets Index gained 0.6% in EUR. Chinese equities recovered.
Small and mid cap stocks performed poorly, with losses ranging between 2 and 3% in Europe and 3 to 5% in the United States.
There was a flight to quality in bond markets. Governments bonds and, to a lesser extent, investment grade corporate bonds, delivered a positive performance. The yield to maturity on 10-year Treasury bonds went from 3.92% to 3.47%. For 10-year Bunds, the YTM declined from 2.65% to 2.29%. High yield corporate bonds did not perform as well, and the euro market even lost 1.2%. Their average yield to maturity rose to 7.68%.
On March 15, the European Central Bank Governing Council decided to raise the three key ECB interest rates by 50 basis points. The rate on the deposit facility, which banks may use to make overnight deposits with the Eurosystem, reached 3%. This decision was expected. Eurozone inflation is hard to bring down. Core inflation (excluding energy and food prices) even rose from 5.6% to 5.7% on an annual basis.
On March 21, the Federal Reserve raised its Fed funds rate by 25bps to bring the target range to 4.75%-5%. Some analysts even thought that the Fed would pause. Thy did not, but their message became less hawkish. US inflation goes down faster than in Europe, and the Fed cannot ignore that aggressive tightening may trigger more failures in the banking system. For the next meeting (May 3), the consensus calls for another 25bps rate hike, but this should be the last one.
The euro gained 2.0% vs. USD, 2.1% against the CNY and 3.1% vs. the NOK.
The price of gold surged by 7.9% in USD. Agricultural commodities rose and base metals were little changed. Crude oil prices declined.