Market volatility continued to be present during the month. Strong February employment and retail sales data weighed on markets during the first half of March, with investors anticipating a higher terminal rate and rate cuts through 2024. However, expectations changed with the collapse of Sillicon Valley Bank, the orchestrated buyout of Credit Suisse by UBS and the problems facing other regional banks in the U.S. stemming from the abrupt increase in interest rates. However, by the second half of the month, the outlook shifted to a lower terminal rate and cuts as early as July 2023, a positive catalyst for both equity and fixed income markets.

As a result, the main stock indexes, the S&P 500, ACWI* and NASDAQ, accumulated yields of 3.51%, 2.82% and 6.69%, respectively, during the month; it is worth noting that within the S&P 500, and as expected, the most affected sector was the financial sector, which went from a positive yield of 4% at the end of February to a negative yield of 6% at the end of March. On the other hand, fixed income markets also enjoyed generalized gains, as a result of the "rally" in bonds as the events described above were discounted. Thus, investment grade corporate bonds returned 2.78% during the month, while the aggregate bond index accumulated a yield of 2.54% during the same period.

Although the collapses of Sillicon Valley Bank and Signature Bank, as well as the rescue of First Republic, show the first victims of the increase in interest rates, at Grupo Inversión we believe that these events belong to idiosyncratic risks, attributable to each institution, and that there is currently no reason to think that these cases could put the rest of the American financial system at risk. Similarly, the problems and scandals faced by Credit Suisse are the result of mismanagement and excessive risks taken by the institution over the last decade.

Looking ahead, we believe that the Fed will remain focused on containing inflation and think that inflation will continue to be the most important variable to follow in determining the future of interest rates and their impact on the economic cycle.