March 23, 2023

WEEKLY MARKET COMMENTARY | MARCH 23, 2023

Unknowns and uncertainty.

Financial markets were volatile last week as investors parsed the risks around bank closures, central banks offered additional protections for depositors, and regulators took a harder look at bank balance sheets.

“For much of last year, volatility was elevated, but the risks were somewhat ‘known’ (chiefly inflation and recession)…Now, the introduction of the banking crisis has created a new unknown, which could ultimately mean a sharper increase in volatility (if worse than expected) or a quick reprieve (if fears prove unfounded),” opined a source cited by Nicholas Jasinski of Barron’s.

Unknown risks create uncertainty, and you know what they say about markets and uncertainty.

Yields on Treasuries dropped sharply as investors sought opportunities they perceived to be safe, reported Lawrence C. Strauss of Barron’s. The yield on the two-year U.S. Treasury dropped from 4.6 percent to 3.8 percent, and the yield on the 30-year U.S. Treasury fell from 3.7 percent to 3.6 percent.

While Treasuries are considered to be quite safe, one lesson from recent events is that there are circumstances in which even safe-haven investments may produce a loss. For example, in general, bonds expose investors to interest-rate risk. When interest rates rise, the value of bonds falls. If a bondholder must sell a bond before it matures, the seller may realize a loss.

In stock markets, bearish sentiment was high. Almost half (48.4 percent) of participants in the AAII Survey of Investor Sentiment were bearish. That’s well above the historic average of 31.0 percent.

In contrast, just about one-fifth (19.2 percent) were bullish. That’s well below the historic average, which is 37.5 percent. The Survey of Investor Sentiment is widely considered to be a contrarian indicator and, in general, the market moves in opposition to contrarian indicators.

Despite investor pessimism, the Standard & Poor’s 500 Index and Nasdaq Composite finished the week higher, while the Dow Jones Industrial Average finished slightly lower.

Markets are likely to remain volatile this week. If you find yourself wondering how short-term market fluctuations may affect your long-term financial goals, get in touch. We’re happy to talk about any concerns.

_______________________________________________________________________________

Sources:

https://www.barrons.com/articles/stock-market-dow-nasdaq-s-p-500-5e86cfe6?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/03-20-23_Barrons_The%20Stock%20Market%20Storm%20is%20Far%20from%20Over_1.pdf)

https://www.barrons.com/articles/treasury-bonds-haven-safety-banks-aee2abd4?mod=Searchresults (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/03-20-23_Barrons_Treasuries%20Reverse%20Course%2c%20Rallying%20as%20Investors%20Seek%20Safety_2.pdf)

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202303

https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-prices/

https://www.aaii.com/sentimentsurvey

https://www.investopedia.com/terms/c/contrarian.asp

https://en.wikipedia.org/wiki/It%27s_a_Wonderful_Life

http://www.script-o-rama.com/movie_scripts/i/its-a-wonderful-life-script.html

https://edie.fdic.gov/fdic_info.html#05

https://www.federalreserve.gov/monetarypolicy/bank-term-funding-program.htm

https://www.barrons.com/articles/federal-reserve-bank-bailout-program-8f6284f1 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/03-20-23_Barrons_Banks%20Didnt%20Flock%20to%20Feds%20New%20Funding%20Program_11.pdf)

https://www.bloomberg.com/news/articles/2023-03-12/us-moves-to-help-depositors-offer-bank-backstop-in-wake-of-svb (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/03-20-23_Bloomberg_US%20Backstops%20Bank%20Deposts%20to%20Avert%20Crisis%20After%20SVB%20Failure_12.pdf)

https://www.goodreads.com/author/quotes/755.Benjamin_Graham

Share This Commentary:

Get In Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Subscribe

Add me to the weekly newsletter to say informed of current events that could impact my investment portfolio.

Important Disclosures:

Securities and advisory services offered through EWA LLC dba Equilibrium Wealth Advisors (a SEC Registered Investment Advisor).
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you.  The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

Request An Appointment

In 15 minutes we can get to know you – your situation, goals and needs – then connect you with an advisor committed to helping you pursue true wealth.