ClearWater Market Commentary as of March 17th, 2023

Here is the ClearWater Market Commentary as of March 17th, 2023:

In this issue:
– Performance of Major Indices
– Market Commentary
– Last Week’s Key Economic  Events and Upcoming Events

Performance of Principle Indexes: 

S&P/TSX Composite Index  
5 Day-1.78%
1 Month-5.50%
1 Year-11.14%

As of 2023/03/17 – Source:

Index PerformancesLast 5 DaysYTD
S&P 5000.98%3.81%
Hang Seng Index0.29%-0.48%
Dow Jones Industrial-0.10%-3.90%
Shanghai Composite1.03%4.71%
Russell 2000-1.06%-2.01%
S&P/TSX Composite-1.78%0.16%
MSCI EAFE-3.10%4.10%
CAC 40-4.55%8.06%
FTSE 100-4.86%0.51%
WTI Crude (Oil)-13.70%-17.60%

As of 2023/03/17- Source:

Last week’s and next week’s key economic events:

US economy (S&P 500 0.98%):

  • The major indexes closed mixed for the week, reflecting the crosscurrents of stresses in the banking sector, worries that a steeper slowdown in the economy would follow, and hopes that the Federal Reserve would now be forced to moderate or even pause in its rate-hiking cycle. 
  • Relatedly, sector returns within the S&P 500 Index varied widely, with communication services and technology shares recording strong gains, while financials and energy shares suffered significant losses. The mega-cap tech shares that generate significant free cash flow and have minimal exposure to the regional banks performed especially well.
  • Worries that the previous Friday’s failure of Silicon Valley Bank (SVB) would set off a wave of new collapses eased over the weekend, despite the closure Sunday of another large regional, New York’s Signature Bank, which had heavy exposure to cryptocurrency markets. The Fed, the Federal Deposit Insurance Corporation (FDIC), and the Treasury Department announced on Sunday, March 12, that all SVB depositors would have full access to funds on Monday morning, while the Fed made additional funding available to banks to safeguard deposits and prepared to address any potential liquidity pressures. 
  • The Fed also announced that it was launching an internal review of its supervision and regulation of SVB, which was overseen by its San Francisco branch.
  • Absent a series of further bank failures, it is not expected that significant new banking legislation will come out of this recent turmoil. Instead, it is anticipated that regulators will propose increased capital requirements for regional banks, perhaps as early as this summer. Most Republicans and some Democrats are skeptical that lax regulation was to blame for the collapses of SVB and Signature. 
  • Hopes that the Fed might also adjust its monetary policy in response to events seemed to drive a rally on Tuesday. Concerns that policymakers would reaccelerate the pace of rate hikes from 25 basis points to 50 basis points suddenly seemed off the table. By the end of the week, futures markets were pricing in zero likelihood of a 50-basis-point hike compared with a 40% chance of one the week before. Markets were also placing a roughly 39% chance on the Fed keeping rates steady at its upcoming meeting on March 21–22 and a nearly 99% probability that the federal funds target rate would end the year lower than its current range of 4.50% to 4.75%.
  • News on Wednesday that European banking giant Credit Suisse (CS) was also experiencing problems sent markets sharply lower again, although many observers pointed out that the Swiss bank’s problems were different in nature (see below). 
  • Domestically, the struggles of First Republic Bank, which had a focus on the tech sector similar to SVB’s—if not as extreme—also weighed on sentiment. After some initial uncertainty, investors appeared relieved by news on Thursday that major banks had deposited USD 30 billion with First Republic in an effort to calm fears about its balance sheet.
  • The bank’s shares tumbled again on Friday, however, perhaps partly due to a report in The Wall Street Journal that some of its top executives—including its chief risk officer—had sold off shares in recent weeks. 
  • According to our traders, the turmoil in the banking sector appeared to turn investors’ eyes away from economic data, including inflation reports, for the first time in several weeks. On Tuesday, the Labor Department reported that headline consumer inflation had moderated in February in line with expectations to 6.0% on a year-over-year basis, its slowest pace since September 2021.  

Canadian markets (S&P/TSX -1.78%):

  • Canada’s main stock index closed negative for the week, with U.S. indexes also posting losses, as the globe continued to grapple with a crisis of confidence in the financial system triggered by two U.S. bank failures.
  • Data from the Canadian Real Estate Association (CREA) reported a decline in home prices in February 2023, with the country’s benchmark home price dropping 1.1% from the previous month to C$704,300 (the smallest monthly decline since March 2022). 
  • The slowdown in sales is directly related to the rapid rise in mortgage interest rates (and therefore higher borrowing costs), resulting in one of the fastest declines in Canadian home values on record. With the Bank of Canada having paused its campaign of raising interest rates, the number of properties hitting the market fell by 7.9% in February 2023, the steepest decline since May 2021. This made February the tightest month the housing market has been since last April (just after the Bank of Canada began raising borrowing costs).
  • However, with rate increases on hold and demand starting to pick up, the main question for the housing market will be whether there will be signs of optimism with supply coming online with the traditional spring selling season.
  • Investors flocked to gold, a historical safe haven, and gold prices rose steadily amid the chaos, nearing US$2,000 on Friday. 
  • Stocks were down this week but fixed-income values went up, a marked difference from last year when both types of investments did poorly. 
  • The market started pricing in not only a more dovish decision from the Federal Reserve next week but also potential for multiple rate cuts in the near future; a significant difference from what it was expecting just a week ago. 
  • The Canadian dollar traded for 72.81 cents US, compared with 72.76 cents US on Thursday.
  • The May crude contract was down US$1.59 at US$66.93 per barrel and the April natural gas contract was down 18 cents at US$2.34 per mmBTU.
  • The April gold contract was up US$50.50 at US$1,973.50 an ounce and the May copper contract was up three cents at US$3.89 a pound.

Performance 2023: S&P 500 Sectors   

Forward P/E Ratios: S&P 400/500/600 Sectors

European and Asian economies:

  • Shares in Europe tumbled on fears sparked by strains in the financial system.  
  • Within the STOXX Europe 600 Index, the banking sector declined the most, reflecting concerns that Credit Suisse’s challenges could create counterparty risk in the financial system. Shares of the Switzerland-based financial giant, which last fall had unveiled an ambitious restructuring plan, sold off after the chair of Saudi National Bank announced that it would not invest further capital in the company. This development followed on the heels of Credit Suisse delaying the release of its annual report due to “material weakness” in its financial reporting controls. News that the Swiss National Bank had offered to provide Credit Suisse with liquidity and that the company had sought to strengthen itself “pre-emptively” by borrowing more than USD 50 billion from the Swiss National Bank gave the stock a lift on Thursday. Nevertheless, media speculation continued that further action eventually could be needed.
  • The European Central Bank (ECB) said that it raised its deposit rate by half a percentage point to 3.0% as part of its ongoing effort to curb elevated inflation. The ECB reiterated that future decisions would be data dependent but gave no forward guidance. It also said that it is monitoring current market tensions closely and that “the euro area banking sector is resilient, with strong capital and liquidity positions.”
  • The central bank’s projections put average inflation at 5.3% in 2023 and to 2.1% in 2025, while the forecast for growth this year was revised higher to 1.0%, reflecting lower energy prices and the economy’s resilience amid the challenges faced thus far. Staff estimates peg economic growth at 1.6% in 2024 and 2025. The ECB cautioned that its forecasts were subject to greater uncertainty than usual because they were drawn up before March 1 and did not incorporate the latest developments.
  • The UK jobless rate was unchanged near a record low of 3.7% in the three months through January compared with the previous three months, the Office for National Statistics (ONS) said. Total pay growth in the period slowed to 5.7% from 6.0%.
  • UK finance minister Jeremy Hunt included larger-than-expected spending of about GBP 20 billion in the budget. Measures included a 100% tax break on business investment, an extension of the energy price cap to help households, and the expansion of free child-care and other reforms to get people back to work. Hunt offered no new tax cuts; however, the corporate tax will still rise to 25%.
  • Despite limited direct impact on Japan’s financial system from the turmoil in the global banking sector, the accompanying dip in investor sentiment helped send Japanese equities sharply lower. Losses were, to a degree, cushioned by speculation that major central banks, in light of the week’s developments and concerns about broader weakness in the global economy, could adopt a less aggressive approach to monetary policy tightening.
  • Japan’s government stated that it will coordinate closely with the Bank of Japan (BoJ) to ensure an appropriate response to recent market volatility caused by concerns about U.S. and European banks. It also said that the Japanese banking system is stable as a whole with Prime Minister Fumio Kishida asserting that domestic banks have adequate liquidity and capital.
  • Many observers agree that Japanese banks appear to have limited funding and liquidity risks due to their balance sheets and the interest rate environment, but worries appear to have grown about the global market turmoil’s impact on BoJ monetary policy. The central bank’s April meeting will be the first chaired by incoming Governor Kazuo Ueda and is likely to be closely watched for any pivot from the current ultra-loose stance.
  • Japan’s annual “shunto” spring wage negotiations, held between businesses, major industrial unions, and government leaders, wrapped up during the week. Many large Japanese companies, including some leading equipment manufacturers and automakers, agreed to the biggest pay rises in decades.
  • Prime Minister Kishida has repeatedly called for businesses to raise wages to compensate for the impact on households of rising living costs and to support the government’s “new capitalism” agenda, which aims to ensure a fairer distribution of income and stronger growth.
  • Chinese stocks ended a volatile week on a mixed note as global banking woes offset optimism about an economic recovery and further monetary support from Beijing. 
  • The People’s Bank of China (PBOC) said it will cut the reserve requirement ratio (RRR) for most banks by 25 basis points for the first time this year in a bid to ensure liquidity and boost the economy. The central bank last cut the RRR in December by the same magnitude. Separately, the PBOC injected a greater-than-expected RMB 481 billion into its financial system via its one-year medium-term lending facility, compared with RMB 200 billion in maturing loans. The central bank left the medium-term lending rate unchanged, as expected.
  • The moves follow PBOC Governor Yi Gang’s surprise reappointment for another term after he was widely expected to retire. Yi’s retention appeared to have a calming effect on markets following the revamp of central government institutions under the State Council, China’s cabinet, in the prior week. Some analysts viewed Yi’s reappointment as a desire to maintain financial stability as China prioritizes supporting the economy amid rising growth headwinds.
  • New home prices in 70 of China’s largest cities rose 0.3% in February, above the 0.1% gain in January and marking the fastest increase since July 2021, according to the National Bureau of Statistics. China’s real estate market has been in a downturn in recent years as cash-strapped property developers have struggled with slowing sales and high debt levels. However, the sector has recovered significantly in recent months, bolstered by Beijing’s dismantlement of its zero-COVID policy in December.

What to watch this week:

  • Existing Home Sales (Feb)
  • Day 1 of March FOMC Meeting
  • Euro Area Economic Sentiment Index
  • Day 2 of March FOMC Meeting; Interest Rate Decision and Press Conference
  • U.K. Inflation Rate (Feb)
  • Bank of England (BoE) Interest Rate Decision
  • Japan Inflation Rate (Feb)
  • Durable Goods Orders (Feb)
  • S&P Global Composite PMI – Flash Estimate (Mar)

Sources:,, Barron’, and

Thank you for checking out our ClearWater Market Commentary for March 17th, 2023. If you would like to receive the ClearWater Commentary at the start of every week, sign-up for our Newsletter.