The spectre of a banking crisis returned to haunt markets in March, with the collapse of two mid-sized banks in the US, as well as the fall of the much bigger Credit Suisse into the hands of its rival UBS, a transaction orchestrated by Swiss regulators.
While there was no direct contagion between the banks, it is clear that the dramatic shift from ultra-loose monetary policy to the highest policy rates since the global financial crisis, tightened liquidity, rising bond yields and a steep inversion in the yield curve, played a significant part in each of the failures.
Considering market returns, after the initial shock in March equities mostly regained the lost ground, leaving the US market up 3.6% for the month, while global developed and global emerging market equities were also up by around 3% in US dollar terms. This capped a strong first quarter, with the US market gaining 7.4%, global developed markets up 7.7% and emerging markets up by 4%. Meanwhile, the big falls in bond yields resulted in strong performance from government bonds in March, with US Treasuries returning 2.9%, ahead of high yield bonds and emerging market bonds, which gained between 1% to 2%.
We made modest adjustments to the Portfolios during the quarter, which are detailed in the commentary sections of the respective factsheets.
