The fund was up 0.8% for the month, while MSCI World was up 3.2% with its performance coming from large cap. growth stocks. Growth outperformed value significantly with MSCI World Growth Index up 7% and MSCI World Value Index down 0.6%. Overall equities performance was mixed with banks having the worst performance due to the SVB and Signature Bank collapse which happened beginning of the month.
The KBW Bank Index was down 25% for the month of March, with the U.S. regional banks experiencing most of the selling as the market was concerned with potential bank runs smaller banks could experience as well as stresses in the overall banking sector. The two collapsed banks both had large amounts of their total deposits being uninsured which made them vulnerable to withdrawals. More specifically, SVB’s collapse was due to their exposure to start-up companies and having a large exposure to longer dated bonds which meant that the value of their securities was declining as the Fed was increasing interest rates. While Signature Bank was exposed to the cryptocurrency sector which has been under scrutiny since FTX failure. As a result of concerns in the banking sector, the market fled for safety in precious metals and interestingly supercap tech names. Silver up 15.2%, gold up 7.8%, platinum up 4.1% and palladium up 3.2%. The big tech names, MAGMA aka Microsoft (+15.6%), Apple (+11.9%), Alphabet (aka GOOGL+15.2%) and Amazon (+9.6%), saw an increase in their share price possibly due to their strong fundamentals. All these firms have stable margins, are cash generative and have strong balance sheets.
The KBW Bank Index was down 25% for the month of March, with the U.S. regional banks experiencing most of the selling as the market was concerned with potential bank runs smaller banks could experience as well as stresses in the overall banking sector. The two collapsed banks both had large amounts of their total deposits being uninsured which made them vulnerable to withdrawals. More specifically, SVB’s collapse was due to their exposure to start-up companies and having a large exposure to longer dated bonds which meant that the value of their securities was declining as the Fed was increasing interest rates. While Signature Bank was exposed to the cryptocurrency sector which has been under scrutiny since FTX failure. As a result of concerns in the banking sector, the market fled for safety in precious metals and interestingly supercap tech names. Silver up 15.2%, gold up 7.8%, platinum up 4.1% and palladium up 3.2%. The big tech names, MAGMA aka Microsoft (+15.6%), Apple (+11.9%), Alphabet (aka GOOGL+15.2%) and Amazon (+9.6%), saw an increase in their share price possibly due to their strong fundamentals. All these firms have stable margins, are cash generative and have strong balance sheets.
The US banks earning season for the first quarter of 2023 starts mid-April and these earnings will be important to paint a clear picture for the market about the risks the sector may face as well as other concerns such as deposits and potential regulatory impacts, if any. Bank stocks do look attractive as some of their share price has fallen significantly despite changes in fundamentals of specific stocks and valuations are at historical lows. Furthermore, Chair Powell has stated that the U.S. banking sector is sound.
*All returns stated are in USD