17-Mar-2023
2 mins read
Global equity markets are now on the edge of completing the first quarter of the current calendar year, 2023. Investors and traders have already witnessed a heavy roller coaster ride from both the domestic and global front, where issues like the Hindenburg Report on Adani followed by the Union Budget and the ongoing issue of SVB default and the Credit Suisse saga. The traders on the bullish side have burnt their hands in the current down move, while on the flip side, the investors have also taken a hard hit on their long-term portfolios.
The Silicon Valley Bank was the 16th largest bank and the second largest to witness a collapse in the United States. In the last ten days, three major banks have already collapsed in the US, which spooked Investor sentiments all over the globe. On the other hand, Credit Suisse, a leading investment banking company, came under the investor’s radar after its largest shareholder Saudi National Bank said it could not raise its stake in the company citing regulatory issues. The aforementioned investor became the biggest shareholder in Credit Suisse after it acquired a 9.9% stake for 1.4 billion francs.
The global markets are on a very nervous footing after these recent events, and with continuous rise in the interest rates by Federal Reserve in the US has put the major lenders all over the globe at risk. If the rate hike cycle continues, then there are chances that a few more mid-size banks may also come up with their internal issues in the public domain. The global economy is already in deep crisis thanks to the ongoing surge in inflation due to Russia-Ukraine War which has lasted for more than a year now, while on the other hand, the growth has also been on a weaker trend.
Below are the factors that cause the rise in crisis of the financial sector all over the world:
- Continuous interest rate hike by Federal Reserve
- High inflation due to Russia- Ukraine war
- Higher bond yields due to high-interest rate cycle
- Low investor confidence due to rising global concerns
- Chinese economic concerns
Global rise in Geo-Political tensions
The global central banks now have the key to controlling the ongoing crisis. They have to choose whether to curtail the inflation worries or leave the banking system to revive on their own. Continuous liquidity tightening from the banks has created a kind of panic in the banking system with rising interest rates and no takers of finance on the other side.
In the coming days, we expect the financial system worldwide will face stiff challenges with respect to credit growth and the rebound in businesses. All eyes of the financial entities will be on the central banks all over the globe whether they stop the rate hike cycle and focus on growth again. Global financial entities will keenly track the outcome of the ongoing Russia-Ukraine War.
For the equity markets, below are a few things to be kept on the radar:
- Federal Reserve move and commentary in the upcoming 22nd March 2023 meeting
- Global Bankers take on the financial system crisis
- Inflation numbers all over the globe
- Chinese and other emerging economic data
Overall, equity markets are expected to remain cautious in the near term, while the long-term story seems to be brighter once the rate hike cycle ends in the second half of the current calendar year. The best investment is made during bad times, and the same is applied in the current scenario. Long-term investors may look to add on good quality stocks in current volatility where the stocks have also witnessed deep cuts, while short-term traders may keep their positions lightened or at least keep a hedge for it to avoid any major financial accidents in the coming days.
