Markets Show Resilience to Start 2023!
The S&P 500 kicked off 2023 with a first quarter total return of 7.5%. Bonds also delivered mostly positive returns last quarter, as interest rates declined, and credit spreads remained relatively tight. It appears investors are expressing optimism that moderating inflation, combined with “better than feared” corporate earnings results, will allow the Fed to pause further rate hikes. These tailwinds were enough to offset a flurry of unpleasant headlines, including the March 10th failure of Silicon Valley Bank, at the time the 16th largest bank in the United States. The collapse of Signature Bank of New York came just days later, and a teetering Credit Suisse was forced into the arms of UBS the very next weekend. These developments, combined with alarming outflows of deposits in many US regional banks, bred concerns about the potential emergence of a broader banking crisis.
