VIDEO: Market Snapshot March 2023

Our Market Snapshot provides an overview of key events that influenced financial markets over the course of March 2023.

Despite the unusually high market volatility around the world on the back of banking jitters and stubbornly high inflation, global asset returns were broadly positive in March. This was in no small part due to the swift central bank and government intervention that halted any broader systemic weakness in the banking sector, as well as a growing sense among investors that, although the growth outlook remained highly uncertain, the US Federal Reserve’s long hiking cycle could be nearing an end. Still, global banking stocks sold off and gold benefited from the flight to safety. Meanwhile, SA equities underperformed both their developed and emerging market counterparts as the FTSE/JSE Capped SWIX recorded a -2.0% total return: only the Resources sector produced a positive return at 2.9%. Bonds rallied around the world, returning 3.2% (Bloomberg Global Agg Bond Index) and 1.2% for the SA All Bond Index.

As of end-March we still prefer local equities over global equities; in our view, their valuations are reflecting a very pessimistic view going forward. Their valuations cheapened marginally during the month, with the Capped SWIX’s forward price-to-earnings (P/E) ratio falling from 9.56X to 9.50X at month-end. On a trailing price-to-book (P/B) valuation measure, the Capped SWIX’s current level of 1.73X remains cheaper than its longer-term median P/B of 2.1X. Compare this to the MSCI ACWI’s forward P/E of 15.4X. Meanwhile, we also prefer SA nominal bonds over global bonds, with the current 10-year government bond’s real yield at around 6.3% far above our long-run fair value assumption of 3.0% and compensating well for the risks involved. You can read more about our latest investment views – both local and global – in Market Observations, as well as in the article by Fabiana Fedeli and the video from our CIO David Knee. 

Finally, M&G Investments’ portfolio performance for March reflected these market moves as our neutral positioning across global equities and bonds in favour of global cash detracted from performance to a small extent. Our local preference for banking stocks dented returns, as did our tilt away from gold stocks. However, globally-oriented shares like AB InBev, Richemont, Naspers and Prosus added value, and our SA bond holdings protected the downside with positive returns over the month. For the 12-month period, our unit trust fund returns remain firmly in positive territory (with the exception of listed property), with the M&G Balanced and M&G Inflation Plus Funds returning 7.1% and 7.6%, respectively, and the more conservative M&G Enhanced Income Fund returning 7.9%.