March was marked by turmoil in the financial sector. Three banks in the United States went bankrupt (including Silicon Valley Bank). Confidence in banks was completely gone for a while, including in Europe. Under pressure from the Swiss government, Swiss bank UBS acquired its industry peer Credit Suisse in an attempt to regain confidence in the global financial system. As a result of the turmoil surrounding banks, safe investments such as government bonds were in demand and experienced positive returns. More risky bonds were lower. Equities were virtually unchanged.
Shares
At the aggregate level, equity markets looked stable in March. The MSCI All Countries World Index rose 0.6% (measured in euros) in March. Remarkably, this was due to equal results for emerging markets and developed markets (+0.6%, that is). Within developed markets, Europe (-0.1%) and Pacific excluding Japan (-1.8%) were negative. The winners were North America (+0.9%) and Japan (+1.5%). Among emerging markets, Latin America (-1.6%) was the least performing region. However, most were positive, including Asia (+1.1%). At the sector level, it is not surprising that financials were in the rear, lagging considerably behind winners such as IT and telecom. In terms of style, we saw that “growth” outperformed “value.
Bonds
The flight to safe government bonds caused interest rates to fall sharply in March. German 10-year rates fell 0.36% to 2.29%. In the U.S., the effect was even slightly larger, the 10-year rate there fell 0.46% to 3.47%. It also manifested itself in risk premiums, which rose in March. The premium for less risky corporate bonds was up 0.21% to 1.68%. The increase in the premium for more risky corporate bonds (+0.47% to 5.01%) was slightly larger, slightly more than for emerging market government bonds (+0.37% to 4.84)%.