The crisis of confidence in the banking system following the collapse of Silicon Valley Bank (SVB), Signature Bank, and Silvergate Bank drove market performance during March. Although this financial system stress increased interest rate volatility to its highest level since the financial crisis, concerns ebbed quickly as the Federal Reserve (Fed) announced a new emergency liquidity facility and UBS’s acquisition of Credit Suisse allayed contagion fears. Both equity and fixed income markets benefitted from repriced Fed policy interest rate expectations, with the S&P 500 returning 3.7% while the Bloomberg U.S. Aggregate Bond Index increased 2.5%. However, this shift in policy rate expectations came with greater recession concerns, contributing to a high level of performance dispersion within equity markets.

Growth substantially outperformed value as market priorities shifted from interest rate sensitivity to economic growth sensitivity. The quality factor also had a strong performance as investors prioritized solid balance sheets and cash flows. This contributed to the wide performance dispersion between sectors within the S&P 500. Information Technology (Info Tech) was the top performer, returning +10.9%, while Financials declined -9.6%. Also, during the month GICS reclassified some companies from Info Tech to Financials (check out our Sector Views for more info on that).

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