Market & Economic Commentary

Market Commentary For the week of March 27, 2023


  • The Federal Reserve concluded its March meeting with the U.S. central bank approving another quarter-percentage point interest rate increase.
    • The move marks the Fed’s ninth consecutive rate increase over the past year, and brings the benchmark federal funds rate to a range between 4.75 and 5.0%, the highest level since September 2007.
  • Importantly, Chairman Jerome Powell signaled that banking-system turmoil could end its rate-rise campaign sooner than seemed likely even just two weeks ago, prior to the prominent failures of SVB and Signature Bank.
    • Chair Powell indicated that officials had considered skipping a rate hike as banking stress intensified but said in the press conference that the central bank will have to wait and see how badly turmoil in the sector will drag down inflation and hiring.
  • While reassuring that “the U.S. banking system is sound and resilient,”2 Mr. Powell “opened the door to the possibility that this was the last rate increase,”3 said Marc Sumerlin, a former economic advisor to President George W. Bush.
    • Key statement language turned more dovish, shifting from indicating investors should expect “ongoing increases” to instead suggesting only “some additional policy firming may be appropriate.”
  • Stocks rose initially, but then declined rather significantly as investors digested the rate decision. All major U.S. averages finished the session down 1.6%, though clawed back to finish the week positive across the board.
    • Treasury yields moved decisively lower on the central bank news with the 2-year yield tucking under 4% and the 10-year hovering around 3.5%.

How do Federal Reserve policy decisions impact you?

  • First and foremost, investors can take some solace in the Fed’s confirmation that the U.S. banking sector remains on solid footing despite a couple, headline-grabbing regional failures.
    • However, in their own words, “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.”4
  • Equally as important, the continuation of the Fed’s monetary tightening regime and resolve to continue raising interest rates despite the banking turmoil indicates that inflation is still significant.
    • “The Fed is saying, ‘we know our actions are causing economic slippage, but we need to take them anyway because inflation is still hot,’” said Jason Pride, chief investment officer of Glenmede’s private wealth business.5


  • This week is highlighted by Personal Consumption Expenditure (PCE) index data which will be released Friday morning.
    • Markets currently expect an increase in the Core PCE index of 0.4% for the month of February, resulting in a year- over-year reading of 4.7% – holding steady from the previous month.

How does the bank collapse impact you?

  • Bank of America Securities Global Research team uses recent Consumer Price Index (CPI) and Producer Price Index (PPI) data to extrapolate indications for PCE readings, which generally release a week or two later for the same reference period.
    • Incorporating recent data from these two indices led the team to forecast in line with market expectations, although “it would still leave inflation well above the Fed’s 2% target and support [their] call for a 25 bp hike in March and a terminal rate of 5.25-5.50% in June,” implying two additional 25 bp hikes.6


Market Index Returns as of 3/24/23WTDQTDYTD1 YR3 YR5 YR
S&P 500 TR USD1.41%3.86%3.86%-11.08%18.97%10.88%
NASDAQ Composite TR USD1.68%13.22%13.22%-15.80%17.93%12.09%
DJ Industrial Average TR USD1.18%-2.21%-2.21%-5.53%17.39%8.85%
Russell Mid Cap TR USD0.79%-0.76%-0.76%-13.07%18.52%7.48%
Russell 2000 TR USD0.53%-1.18%-1.18%-15.26%17.51%4.18%
MSCI EAFE NR USD1.59%4.28%4.28%-3.99%12.61%2.92%
MSCI EM NR USD2.23%1.97%1.97%-11.05%7.68%-1.29%
Bloomberg US Agg Bond TR USD0.52%3.44%3.44%-3.37%-2.17%1.10%
Bloomberg US Corporate High Yield TR USD0.35%1.80%1.80%-4.15%7.38%2.88%
Bloomberg Global Aggregate TR USD0.75%3.39%3.39%-6.83%-2.62%-1.28%


  • Despite ongoing banking turmoil and a sour response to the week’s Fed meeting, the major U.S. averages all finished the week up more than 1% with the NASDAQ leading the way, registering a 1.68% gain.
  • International stocks performed well, but EM outpaced international developed markets by nearly a percent and beating all other stock indices on the week, returning +2.23%.
  • Small caps underperformed their large cap peers with the Russell 2000 Index up just 0.53% for the week.
  • Bonds had another solid week with yields contracting significantly in response to the Fed news.
    • The Bloomberg US AGG Bond index returned +0.52%, and Bloomberg Global AGG index +0.75%.


  • Miami, San Diego State Join a Men’s Final Four That Is Missing the Top Seeds: At this time last year, a collection of college basketball’s royalty—Duke, Kansas, North Carolina and Villanova—was preparing to gather for one of the highest-pedigreed Final Fours in men’s tournament history. This season, the glamor teams are out, replaced by a trio of lesser-known underdogs from beach communities—Miami, San Diego State and Florida Atlantic—plus the northerners from Connecticut, who are by far the most familiar basketball power in the pack. It is the first time since 2011 that none of the tournament’s No. 1 or No. 2 seeds reached the Final Four. Miami and San Diego State, each a No. 5 seed, defeated second-seeded Texas and sixth-seeded Creighton respectively on Sunday. Both games were thrillers that saw early deficits overcome and late, nervy moments endured. The Hurricanes and Aztecs join a Final Four that already included No. 9 seed Florida Atlantic and No. 4 seed UConn, who won their regional finals on Saturday.8
  • First Citizens Acquires Much of Failed Silicon Valley Bank: First Citizens Bancshares Inc., one of the nation’s largest regional banks, is buying large pieces of Silicon Valley Bank more than two weeks after the lender’s collapse sent tremors through the banking system. The Federal Deposit Insurance Corp. said First Citizens is acquiring all of Silicon Valley Bank’s deposits, loans and branches, which will open Monday morning under the new ownership. The purchase includes $56.5 billion in deposits and about $72 billion of SVB’s loans at a discount of $16.5 billion. Some $90 billion of SVB’s securities will remain in receivership. Regulators took control of Santa Clara, Calif.-based SVB on March 10. The collapse sparked a panic that led to the weekend failure of Signature Bank and a dramatic intervention by financial regulators aimed at easing fears that depositors would flee smaller lenders. The sale represents a milestone in regulatory efforts to clean up after two of the largest bank failures in history, at a time when investors are on edge about the health of the global financial system. Shares of First Citizens surged more than 40% shortly after the opening of trading Monday. Shares of other regional banks including First Republic Bank, PacWest Bancorp and Western Alliance Bancorp were also higher.9

Reprinted with permission from BTN. Copyright © 2021 Michael A. Higley.

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