After a turbulent period, which saw significant stress within the banking system and further interest rate hikes, investors took comfort this week in the absence of any further bad news. Investment markets were positive, with both equities and corporate bonds higher as worries over further contagion within the banking sector subsided.
The FTSE 100 index, which includes big weights to sectors like banks and energy stocks, has bounced back strongly. It now trades roughly 5% higher than the low reached on the morning of Monday 20th March, as news of the Credit Suisse merger was released.
Despite the calm on the surface of the market, strong currents are still present below and investor sentiment remains fragile. Attention will turn to inflation data in the coming weeks, as investors look for clues regarding central bank policy and the potential for further interest rate rises.
With today marking the last day of the first quarter of 2023, earnings data for the period (released towards the end of April) will be scrutinised to see how the increase in the price of money is affecting individuals and businesses alike. As a result, we would expect volatility to remain elevated in the coming weeks and continue to maintain our preference for exposure to high-quality businesses within portfolios.
John Naylor, Chartered FCSI – Head of Investment Committee