Company / Analytics

Analytics, 19 March 2023

Week 11 in Brief

North America

Wall Street experienced a hectic week, which started with the collapse of two banks, leading to fears that problems in the banking sector could spread. Despite emergency intervention by governments and major banks, investors’ worries persisted, resulting in a sharp decline in stocks at the end of the week. First Republic Bank’s shares have been falling throughout the week due to investors’ concerns that it could be the next bank to fail after Silicon Valley Bank and Signature Bank. Although the First Republic received a $30 billion deposit pledge from several financial institutions, its stock prices still dropped by over 30%, indicating that market sentiment is driving the markets rather than facts.

Meanwhile, the Swiss Central Bank offered Credit Suisse around $50 billion in emergency funding, but its shares still fell by approximately 10% on Friday. Although there is no indication of problems with First Republic or the banking sector as a whole, investors remain concerned that there may be more bank failures. As a result, global markets continue to experience volatility and uncertainty.

How did the major indices perform? On Friday:

For the week:

What drove the U.S. market?

How did the European markets perform?

Bonds and Commodities


Next week

As the Federal Reserve prepares for its meeting next week, market analysts are expecting continued volatility in the stock market. The recent plunge in bond yields has helped boost equity markets, particularly tech and growth stocks, which have outperformed bank shares. However, the decline in yields could also indicate investors’ concerns about a possible economic slowdown, prompting the Federal Reserve to curb its aggressive rate hike strategy.

The current interest rate move is seen as a “tailwind for stocks” in the short term, but the market is uncertain about how the Federal Reserve will react to the recent developments in the fixed-income markets. Investors are assigning a 60% probability of a 25 basis point rate increase at the Fed’s March 21-22 meeting, with rate cuts expected later in the year.

While some market analysts are optimistic that the rally in tech stocks will continue, others are skeptical about stock valuations. The S&P 500 currently trades at 17.5 times forward earnings estimates compared to its historic average P/E of 15.6 times. The Nasdaq 100, which has been buoyed by strong gains in mega-cap stocks such as Microsoft Corp and Alphabet Inc, is currently trading at 27.3 times forward earnings.

The Federal Reserve’s decision next week will likely have a significant impact on the markets, and investors will be closely watching for any signs that the central bank may prioritize financial stability over inflation-fighting credibility. With the market remaining volatile, investors are advised to stay cautious and diversify their portfolios to minimize risks.

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