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MARKET MONITOR 
|
March 24

MARKET MONITOR | March 24

Chart of the Week


MONETARY POLICY

Over the past 18 months, the Fed has focused predominantly on one problem: inflation. Recent financial system stress, however, partly due to the most rapid hiking cycle on record, has altered policy priorities, in our view. As such, we believe that financial stability may be the near-term focus, and market pricing reflects this. The market implied terminal rate has fallen as many investors have grappled with how much higher the Fed can hike without any further stress.

Source: Bloomberg and Goldman Sachs Asset Management. As of March 23, 2023.

Market Summary


GLOBAL EQUITIES

Global equities rose last week amidst 25 bps rate hikes by the Fed and BoE. The S&P 500 was up nearly 3% on the week prior to Fed Chair Powell’s press conference but gave up gains in the hours that ensued, despite commentary suggesting that the end of the hiking cycle may be in sight. Ultimately, the index ended last week up 1.41% despite the ninth Fed hike in a year. In Europe, the STOXX 600 and FTSE 100 ended last week up 0.96% and 1.05%, respectively. Read More

COMMODITIES

Oil prices rose last week, rebounding from 15-month lows the week prior, as stability in the European banking sector assuaged concerns of a crisis. WTI and Brent crude ultimately closed higher at $69.26 and $74.99/bbl, respectively, despite crude inventories rising to a 22-month high. Gold prices extended their rally to price levels not seen since March ’22, ultimately closing the week higher at $2001.70/troy oz. Read More

FIXED INCOME

Global sovereign yields remained volatile last week, rising mid-week as reports hinted at potential legislation to expand the $250k FDIC insurance ceiling. Yields quickly fell later in the week, however, following comments from Secretary of the Treasury, Janet Yellen, indicating that broad insurance coverage was not an option being considered. Ultimately the 2-Year and 10-Year US Treasury yields closed last week lower at 3.78% and 3.38%, respectively. In Europe, the 10-Year German Bund yield followed a similar path, closing lower at 2.13%. Read More

FX

The US dollar fell against a basket of major currencies last week as market participants perceived Fed Chair Powell’s comments as dovish, despite a move higher in the Fed’s policy rate. As a result, the US dollar index ended last week down –0.88%. In Europe, the euro and pound sterling each slightly strengthened against the greenback, ending last week at $1.0760 and $1.2227, respectively. Read More

Economic Summary


MONETARY POLICY

The FOMC raised the target range for the federal funds rate by 25 bps to 4.75—5.00% in what markets interpreted to be a “dovish” hike. The FOMC removed the reference to “ongoing” hikes in its statement and instead wrote that, “additional policy firming may be appropriate.” Powell stated in his press conference that credit tightening, in part due to recent financial system stress, may have had similar impacts to a rate hike. This logic may have informed the FOMC’s expectation of a 5.125% terminal rate and zero rate cuts through year-end. Elsewhere, several central banks in the Euro area raised rates last week to tackle inflation despite banking-sector stress. The Swiss National Bank hiked by 50 bps, while Norges Bank and the Bank of England (BoE) implemented more modest 25 bps increases. Despite UK CPI printing higher than consensus expectations last week, the BoE noted that sequential wage pressures were weakening, signaling that the end of the hiking cycle may be in sight, in our view. Read More

INFLATION

Core CPI in the UK increased to 6.2% YoY and headline CPI increased to 10.4% YoY in February, both above consensus and the BoE's expectations. This resurgence was driven by an acceleration in services pressures, specifically in restaurants/hospitality. Despite the upside surprises, we expect that both core and headline inflation are past their respective peaks but look for inflation in the UK to remain elevated throughout the first half of 2023 as wage growth remains elevated. Read More

LABOR

Initial jobless claims edged down by -1k to 191k in the week ending March 18th, against consensus expectations for an increase. We believe seasonal adjustment issues have exerted a downward pressure on initial claims over the past few months, but nonetheless, the labor market remains tight. We anticipate annual revisions to the seasonal factors at the start of April may eliminate seasonal distortions. Read More

Style Performance


US Equity Size & Style Returns

MONTH-TO-DATE

Large
-4.37%
-0.49%
3.44%
Medium
-7.70%
-6.09%
-3.17%
Small
-10.44%
-8.41%
-6.44%
Value
Core
Growth

YEAR-TO-DATE

Large
-2.96%
3.66%
10.73%
Medium
-3.45%
-0.76%
4.24%
Small
-4.16%
-1.18%
1.75%
Value
Core
Growth

MSCI World Size & Style Returns

MONTH-TO-DATE

Large
-3.95%
0.17%
4.19%
Medium
-7.32%
-5.14%
-2.28%
Small
-8.27%
-6.39%
-4.47%
Value
Core
Growth

YEAR-TO-DATE

Large
-3.07%
4.49%
12.38%
Medium
-2.69%
0.12%
3.85%
Small
-2.13%
0.20%
2.60%
Value
Core
Growth

US Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
2.51% *
3.03%
4.86% *
Corporate
1.51% *
2.12% *
3.58% *
High Yield
-0.61% *
-0.34% *
0.05% *
Short
Intermed.
Long

YEAR-TO-DATE

Government
2.35% *
2.85%
6.28% *
Corporate
1.87% *
2.62% *
4.70% *
High Yield
1.85% *
2.15% *
2.06% *
Short
Intermed.
Long

European Fixed Income Maturity and Quality Returns

MONTH-TO-DATE

Government
1.42%
3.26%
6.12%
Corporate
0.76%
1.54%
3.20%
High Yield
-1.15%
??????
??????
Short
Intermed.
Long

YEAR-TO-DATE

Government
1.19%
3.26%
6.41%
Corporate
1.11%
2.58%
4.43%
High Yield
1.86%
??????
??????
Short
Intermed.
Long

Source: Bloomberg and Goldman Sachs Asset Management (as of 03/24/23)

VIEW LESS DISCLOSURE

Key Economic Releases


Monday, Mar 27

Tuesday, Mar 28

CB Consumer Confidence
(Cons: 101.0, Prior: 102.9)

Wednesday, Mar 29

Pending Home Sales MoM
(Cons: 1.0%, Prior: 8.1%)

Thursday, Mar 30

BoE Inflation Letter

Friday, Mar 31

US Core PCE YoY
(Cons: 4.3%, Prior: 4.7%)
Euro Area CPI YoY
(Cons: 7.4%, Prior: 8.5%)
Euro Area Unemployment
(Cons: 6.7%, Prior: 6.7%)

VIEW LESS DISCLOSURE

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