Written by Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
It was a risk-off week for equity markets following the news of the collapse of Silicon Valley Bank. The bank provided loans to tech startup companies. Most equity markets declined for the week, with the exception of Japan. UK stocks ended down just over 2%. Government bonds markets performed well, as the news led investors to believe that central banks will ease up on rate rises.
US regulators shut down Silicon Valley Bank on Friday, marking the largest US bank failure since 2008. The Federal Reserve on Sunday night announced that all depositors with Silicon Valley Bank would get their money back. It will also make available additional funding to eligible depository institutions. HSBC has bought the UK arm of Silicon Valley Bank.
In response to Taiwanese security concerns, Taiwan President Tsai Ing-wen and US House Speaker Kevin McCarthy have decided to meet in California instead of Taipei. This decision was made after Chinese foreign minister Qin Gang warned against attempts to contain and suppress Beijing, prompting concerns over potential repercussions for Taiwan.
This week a Consumer Price Index report, which is a measure of inflation, is scheduled to be released. The latest report covering January showed that the government’s Consumer Price Index fell to an annual rate of 6.4%. Investors will be looking to see if inflation continues to decline from the multi-decade highs of last year.
During his speech to the House of Financial Services Committee, Federal Reserve Chair Jerome Powell stated that no decision has been made yet on whether to increase the pace of rate hikes. This comment comes after his earlier speech on Tuesday, in which he indicated that the Fed would be willing to speed up rate hikes if data suggested that it was necessary to do so.
This week, the price of oil decreased by 4%, as concerns persisted that the Federal Reserve’s plans for more severe tightening may damage economic growth and limit demand. Haitham Al-Ghais, the Secretary-General of OPEC, expressed similar worries, highlighting the potential threat to the market posed by declining oil consumption in the US and Europe.
The Biden administration’s climate agenda includes a $6bn Industrial Demonstrations Program aimed at accelerating decarbonization in high-emitting sectors such as steel, cement and concrete. The program, which is funded by the Inflation Reduction Act and the Bipartisan Infrastructure Law, will provide up to 50% of the cost of early-stage decarbonization projects prioritizing deep decarbonization, new cleaner markets, follow-on investments, and community benefits.
This upcoming week in the US is set to be eventful, with a focus on the release of the inflation report and retail sales data. Additionally, investors will be monitoring the financial sector for any indications of contagion resulting from the Silicon Valley Bank fallout. The ECB will be making decisions regarding monetary policy, while China will be publishing data on industrial production and retail sales. Finally, the UK unemployment rate will also be released.
Sources: Nathan Sweeney – CleverMPS Portfolio Manager & Marlborough’s Deputy CIO – Multi Asset, Marlborough’s Multi-Asset Investment team, T.Rowe Price, John Hancock, Morningstar, PIMCO, Trading Economics, and ESG Today.
Risk Warning: These are Nathan’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
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