March 2023 Monthly Review

Jordi Visser

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March will be remembered throughout history as the month that Silicon Valley Bank collapsed. Market participants started the month focused on the Fed and inflation. Two weeks later with SVB and Credit Suisse gone, the focus shifted to whether this was the beginning of another financial crisis. 2yr yields had their largest one-day bp decline since Black Monday in 1987. For the month, 2yr yields were down 79 bps as the market started anticipating the likelihood that the Fed would need to pause and eventually cut rates. This was on the back of fears that the regional bank crisis would lead to a contraction in lending followed by a recession. Despite fears and doom and gloom talk, the SPX closed up 3.51% for the month. Sector and factor moves showed the main equities shift within the month was a rotation from beta and bad balance sheets to safety and good balance sheets.
 

There were some dramatic losses in the hedge fund space, which led to risk reduction just after the SVB news but by the end of the month, market participants reported that outside of the financial sector, things stabilized to where the winners and losers at this stage made sense. These recent moves are an important backdrop for where we are in the current cycle. If the banking crisis leads to tighter credit throughout the economy but is not a systemic event, the market was already priced for a recession as we entered this year.  A Fed on hold, lower inflation, and a mild recession would be viewed positively by the market, leading to good dispersion opportunities as the strong remain strong and the weaker businesses suffer. Dispersion is normal coming out of a recession, so we look forward to logical risk-taking in the months ahead, with this not being a systemic event.

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Important disclosures: Disclosures: This content (the "Insights Page") is provided by Weiss Multi-Strategy Advisers LLC ("Weiss"). The views expressed on the Insights Page are for informational purposes only and are subject to change without notice. Information on the Insights Page has been developed internally and is based on market conditions as of the date of the original post on the Insights Page from sources believed to be reliable. Nothing on the Insights Page should be construed as investment, legal, tax, or other advice and should not be viewed as a recommendation to buy or sell any security or adopt any investment strategy. Past performance is no guarantee of future results. Please consult your own advisers regarding business, legal, tax, or other matters concerning investments. Weiss has no control over information at any external site hyperlinked on the Insights Page. Weiss makes no representation concerning and is not responsible for the quality, content, nature, or reliability of any hyperlinked site and has included hyperlinks only as a convenience. The inclusion of any external hyperlink does not imply any endorsement or ongoing monitoring by Weiss of any hyperlinked site. Investing in securities is speculative and involves substantial risk of loss.

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