March 2023 Market Update
March was an eventful month in global markets marked by the failure of a regional US bank, as interest rate rises begin to impact business models used to a lower interest rate environment. This changed the course of market forecasts on rate rises both in the US and domestically, as the focus of investors shifts from inflation concerns to growth concerns.
In response, central banks and regulators provided emergency funding solutions to the US banking sector, with the surge in liquidity driving the equity market higher in the latter half of the month. Slightly dovish commentary from central banks, including a rate rise pause from the RBA, only added fuel to the equity market rally.
While the worst of the banking solvency issues may potentially be behind us now, we foresee a challenging environment for bank margins globally over the next few months as they adjust to very thin or negative interest rate spreads on their longer dated assets, relative to their shorter dated liabilities.
As such we remain cautious as we await to see whether this will have broader impacts on credit and economic growth. The Australian Equity market ended the month largely flat (ASX 300 total return -0.2%) and global equities finished with a positive return of +2.3%. Australian government bonds were the real standout performer however with a positive return of +3.1%.
TWD SMA Portfolios
March was a strong month for TWD SMA’s with positive returns across the board, ranging from Conservative (+1.2%) to Aggressive (+0.5%). This wrapped up a strong quarter with positive returns across all strategies from +2.8% on Conservative to +4.2% on Aggressive. Contributions to performance were from a broad range of sources, but an overweight to Australian government bonds, and some strong performances from key active fund managers, Capital Group and MFS, as well stocks Brambles and Aristocrat Leisure, were key.
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