The month of March certainly kept investors on their toes. We saw some interesting developments with the fall of Silicon Valley Bank and we got some positive inflation news and US interest rate news. It was a busy month, but with all that said, March proved to be a positive one.
March 2023 Performance:
- S&P500: 4.0%
- NASDAQ: 7.1%
- DOW: 2.9%
- TSX: 0.1%
- Global Bond Composite Index: 2.59%
Q1 2023 Performance:
- S&P500: 7.0%
- NASDAQ: 16.5%
- DOW: 1.4%
- TSX: 4.6%
- Global Bond Composite Index: 2.92%
To start off, we at Oculus have been receiving several inquiries into the banking system and the fall of Silicon Valley Bank, I wanted to use this time to provide an overall summary as to how the SVB failure happened.
There were a few contributing factors to the fall of Silicon Valley Bank, but it can be nicely summed up with a slight spin on the age-old adage “Don’t put all your eggs in TWO baskets.” Unlike a major bank such as TD or RBC where people and companies from all walks of life use them, the vast majority of SVB’s depositors were from the same industry, tech. For the last decade this concentration in tech worked great for SVB as deposits flowed in and interest rates were low.
SVB took those deposits and put them in government bonds. So, they had all their clients from one sector, and all their money in one investment type. Then in 2022, interest rates went up rapidly, hurting both the tech sector, and the value of government bonds. What this resulted in was SVB having less assets and tons of clients needing money to keep the lights on.
Even with the drama surrounding SVB, there were some bright spots in the global economy that helped with the positive month. One of which was inflation coming down in Europe (slowed to 6.9% from 8.5%) and the Federal Reserve in the US only raising rates by 0.25%. Most importantly there is strong hope in the market that the rate hike cycle in the states might be heading for a pause, which will be extremely positive for all investors. All of these factors contributed to the market’s appetite for risk, which helped boost the month and end the quarter on a high note.
