Equity and bond markets concluded 2023 strong, following positive economic data in November that indicated inflation was declining across developed markets, and the economic moderation in the US and the UK was not as bad as had been feared. This was further backed by a positive decline in commodity prices, despite the ongoing conflict in the Middle East. The price of a barrel of crude oil fell to $80, thanks to an increase in US supply and OPEC+ members’ failure to adhere to production quotas.

2023 was expected by most, to be a better year for investment markets, but a bad year for the economy. This has somewhat been the case, however, the latter has not been with most economies appearing more resilient than expected. UK GDP is surprisingly on the upside, having risen 0.2% over the quarter, when the market consensus was in fact for the economy to have flat lined. Combined with inflation surprisingly falling to 6.7%, the lowest rate since February 2022, this was enough to see the Bank of England hold interest rates for the first time since December 2021.

We finished the first quarter with a market sell-off as the fear of another financial crisis arose due to Silicon Valley Bank going bust. However, these fears were short-lived as we witnessed equities and bonds bounce back. This was led by big growth stocks such as Nvidia and Tesla producing triple digit returns year to date, driven partly by the overly positive sentiment around artificial intelligence.

Both equities and bonds were broadly positive over the quarter, although volatility remained elevated as several headline-grabbing news stories occurred. 

We saw Silicon Valley Bank (SVB) collapse spook investors in March as fears of another banking crisis rose. However, it is clear to see that lessons have been learnt from the financial crisis in 2008. We saw equity markets start to recover as the fear of another banking crisis subsided, and central banks stepped in to protect customers.