Market development – Q1 2023
Despite turmoil in a few select banks, high inflation and higher interest rates from the central banks, the financial markets came out of the first three months of the year with a solid return, recording positive returns on most asset classes - including Danish government and mortgage bonds as well as global shares in DKK.
First and foremost, the quarter will be remembered for the negative headlines and market turmoil related to the collapse of the US banks Silicon Valley Bank and Signature Bank as well as the Swiss bank Credit Suisse during the month of March.
However, the authorities in both the US and Switzerland moved fast to implement measures in order to contain and stabilise the situation. The stock market subsequently adjusted decently.
The market turmoil lead to interest rates dropping significantly during March, to the bond market’s delight, even though both the American, European and Danish central banks decided to further raise interest rates in March, in their bid to combat a continued elevated level of inflation.
However, as the inflation is on a downward path, the financial markets glimpse a pause to central banks’ interest rate hikes, which may ease some of the pressure, in the long term, which has been weighing down on the stock and bond markets during 2022.
Figure 1: Development of equities and bonds in 2023