During the last month we saw ongoing turbulence in the global banking sector, which remained a major news story. Following SVB and Crédit Suisse, First Republic Bank had to be rescued as regulators sold its assets to JPMorgan. Relative to the S&P 500, US Financials have never recovered from the lows they reached in 2009 after the big financial crisis. Warren Buffett and Charlie Munger, commenting on the current state of the banking sector, highlight the issue of faulty incentives and ethical values among both bankers and their regulators.

These failures in banking appeared as the FED started unwinding its balance sheet after it increased the M2 money supply by 43% from February 2020 until April 2022. M2 growth currently stands at -4.43% and US CPI inflation got somewhat under control at 4.93%. 

Short-term yields rose as long-term yields fell, causing the Yield Curve to invert further into red territory, which is often considered to be a predictor of an economic recession. These developments have led some experts, including legendary investor Stan Druckenmiller, to predict a 'hard economic landing'.

Credit Spreads between Baa- and Aaa-rated corporate bonds have been rising since March 6th, when they reached their lowest level since 2009. The Yield Spread between Mortgages and US Treasury Bonds rose again, creating additional pressure on US home prices.

Inflation expectations for the next 5 to 30 years hover between 2.11 and 2.47% and have been falling since May 2022.

The dynamics in (nominal) yields and inflation expectations led to rising real yields, which is generally bad for Gold prices. However, the metal, which is also known to be a harbor of safety, remained unaffected and has been rising recently.

Silver rose faster than Gold, causing the Gold/Silver Ratio to fall. The US Dollar Index followed accordingly.

With rising Gold prices, the Real Estate/Gold Ratio and the Oil/Gold Ratio fell.

Various valuation metrics for the US stock market are rising once again after they put in a short-term low in fall last year.

Segmenting the US stock market, Growth stocks have been outperforming Value stocks since the beginning of the year.

Conversely, Small-cap stocks underperformed large-cap stocks. Despite this, inflation expectations remained stable.

Looking at equity markets internationally over the past 3 years, Mexico (+99.61%), Argentina (+154.31%), and India (+81.14%) stand out. Turkish stocks reversed after a spectacular rise in 2022. Following the Ukraine invasion and the resulting economic sanctions, the Russian MOEX stands at -6.32%.

Finally, looking at Crypto, since the beginning of the year Bitcoin and Ether are up 60.06% and 48.72% respectively after a very turbulent 2022. Bitcoin Dominance is currently at critical resistance at 47% after it fell in the 2017 and 2021 crypto bull markets.

Thanks for reading and have a nice day!