The month of March was marked by a lot of volatility and concern related to a possible financial crisis. The very rapid reversal of rates began to claim its first victims. In mid-March, U.S. banks Silicon Valley (SVB) and Signature Bank had to file for bankruptcy and were taken under surveillance by the authorities. Their problem was that they did not sufficiently hedge the risks of changing interest rates. Due to the sharp rise in interest rates, their bond investments suffered a significant loss in value. In order to fill the gap, SVB decided to intervene with a capital increase, which frightened investors and caused massive outflows of funds. Bank failure became inevitable fueling fears of a banking storm even in European institutions. A storm that also hit the Swiss banking world and, due to massive outflows of client funds due essentially to a lack of confidence, aggravated the situation of the large Credit Suisse institution. Interventions by the Swiss regulator (FINMA) to confirm the stability of the balance sheet ratios as well as the liquidity injection by the Swiss National Bank were to no avail. Given the circumstances and the tight timeframe, a takeover by rival UBS ultimately seemed the only solution. A dangerous widening of the crisis was thus avoided, but with of heavy consequences because the transaction shows obvious anomalies. The shareholders’ meetings were unable to express their opinion. Moreover, while Credit Suisse shareholders recovered a tiny part of their investment, bondholders with the highest level of subordination recovered nothing, despite having priority over shareholders. This triggered a storm in the credit market, which subsided only after European banking supervisors assured that nothing of the sort would ever be allowed elsewhere. In addition, towards the end of the month UBS announced that as of April 5, Sergio Ermotti would return as CEO and, with his experience in restructuring, lead the integration of Credit Suisse.

Despite the negative news on the banking sector, U.S. stock markets recovered from the previous month’s losses, S&P 500 up +4% and Nasdaq up +7.40%. Europe was also positive with Euro Stoxx 50 index +1.65%. Italian FTSE MIB index -2.96% was more affected due to its overexposure in banking stocks. Slightly positive Swiss stock exchange SMI with +0.45%. Gold rises has it benefited from all this uncertainty, proving once again that it offers good protection against crises.

At the current stage we expect equity markets to remain volatile, so we remain cautious toward equities.