“We are moving towards a more uncertain economic backdrop, with lower visibility on central bank actions. This calls for a prudent stance on risk assets.”
March brought a wake-up call to markets after a complacent start to the year. The trigger was the failure of Silicon Valley Bank and other US regional banks, followed by Credit Suisse in Europe. The repricing of core yields and changes to market expectations regarding central bank actions have been massive in both the US and Europe. Bond volatility reached the highest levels since the Great Financial Crisis, while equity volatility also spiked, but to a lesser extent.
Looking ahead, we think investors should consider the following factors:
- Concerns around systemic risks. We don’t think we face a systemic crisis as banks in the US and Europe are in much better shape compared to 2008, with more stringent regulation. Importantly, European regulators’ affirmation that they do not aim to change the credit hierarchy (the Swiss case is idiosyncratic) should provide support to markets.
You can now read the full whitepaper at the link below
