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The Power of Patience as Markets Remain on Edge

The trajectory of interest rates continued to drive global markets in the first quarter of 2023, as expectations for the pace of rate hikes oscillated on inflation news and the threat of banking crises in the U.S. and Europe. After a strong start in January, the MSCI All Country World Index (ACWI) pulled back in February and rebounded in March, ending the quarter in positive territory.

The volatility that marked 2022 persisted. Easing inflation and solid economic growth in the U.S. led to a 0.25% interest rate rise at the start of February, the smallest increase since the Federal Reserve’s (Fed’s) first hike in March 2022, helping to fuel a strong start to the year for the S&P 500® and indices globally. However, the continuation of robust jobs and earnings data fueled expectations that rates would move higher and remain elevated for longer than previously forecast, pushing down market performance in February.

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Index definitions:
MSCI All Country (AC) World measures equity performance of developed and emerging markets. MSCI EAFE® measures developed foreign market equity performance, excluding the U.S. and Canada. MSCI Europe measures equity market performance of Europe’s developed markets. MSCI Japan measures performance of the Japanese market’s large and mid-cap segments. MSCI AC Asia Pacific ex Japan measures equity market performance of Asia’s developed and emerging markets (excluding Japan), Australia and New Zealand. MSCI Emerging Markets measures equity market performance in global emerging markets. MSCI AC World ex US measures equity performance of developed and emerging markets, excluding the U.S. S&P 500® measures performance of 500 of the largest U.S. companies. All indexes are free float-adjusted market cap-weighted and calculated on a total return basis with dividends reinvested.

The commentary is the opinion of Vontobel Asset Management. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

Past performance is no guarantee of future results.

All investments carry a certain degree of risk, including possible loss of principal.

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