The battle between the “bulls” and the “bears” is still raging and the winner has not yet been determined. While the technical background for equity markets has been improving recently, we decided last week to keep our cautious stance on equities. Indeed, our view remains that the aftershock of the Fed's policy tightening is starting to be felt in the financial system and the wider economy. We believe that the macro-economic context is starting to deteriorate and that we have entered yet another period of uncertainty which should lead to an Equity Risk Premium re-rating.

Q1 2023 was turbulent period for the market, a hawkish start of the quarter ended in solid gains for equity markets, while the global banking industry was nearly brought to its knees. Here are 10 stories to remember from Q1 2023.

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Last week we decided downgrade equities from positive to cautious. Indeed, our view is that the aftershock of the Fed's policy tightening is starting to be felt in the financial system and the wider economy. We believe that we have entered yet another period of uncertainty which should lead to an Equity Risk Premium re-rating. This week, we are further de-risking portfolios by downgrading credit from attractive to positive.

The private banking industry currently faces a multitude of challenges: changing client needs, the arrival of disruptive business models and new entrants, regulatory pressures, new technologies, a more complex and uncertain macro-economic and financial environment, etc. For incumbents, it is urgent to react and reinvent themselves.

DOWNGRADING EQUITIES TO CAUTIOUS As an old adage says, Monetary policy tightening is like dynamite fishing: when the blast hits, it decimates everything in the vicinity. The small fishes rise to the surface first. But it can take some time for the whale(s) to show up. With the unwind of a major bank (Silicon Valley Bank) last week and another (Signature Bank) over the weekend, it is clear that the aftershock of the Fed's policy tightening is starting to be felt. But should we see these two banks as whales or as just being those small fishes? At this stage, it is very difficult to answer to this question. However, we believe that we have entered a new period of uncertainty which should lead to an Equity Risk Premium re-rating. As such, we are downgrading equities from positive to cautious.

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2022 was the worst year for global equity markets since 2008 while January was the best month for stocks since 1987. Investor sentiment has thus shifted and there are a few rationales for this.