20 March 2023

Banking sector fuels financial market volatility

The banking sector remained centre stage in the week that has just ended and everything suggests that the storyline in the financial markets will not change much in the coming days. The crisis and the rescue in extremis of Credit Suisse are only the last piece in seven days marked by high volatility. Investors continue to bet that the cycle of interest rate hikes is coming to an end, while in the background there are concerns about the consequences for the economy of a period of high interest rates. Against this backdrop, as risk-on/risk-off report remind us, it is volatility that is taking the reins of the market, while on the bond front, the recovery of short-term bond prices continues. Let’s look at some data from our weekly analysis.

In the past week, 43% of the instruments and indices used for our analysis showed a positive change. 55% experienced a negative change. Analysing by macroclass, 31% of the equity instruments and indices recorded a positive weekly variation. 89% of bond instruments and 61% of the other asset classes used for our analysis.

Improving valuations in the past week accounted for 41% of the total. The previous week, upwardly adjusted valuations were 41% of the total.

In our analysis of equities, improving valuations accounted for 43% of the total. In our sector-by-sector analysis, the bad week for the banking sector in Europe and the “revenge” of technology in the very short term in the US.

In our analysis of bonds, improving valuations accounted for 37.5% of the total.

Among analyses of other asset classes, improving valuations accounted for 47% of the total.

Of the ratings, 44% were above the short-term average. 32% were above the long-term average of valuations. Last week they were 31% and 32% respectively.