In this episode of KayneCast, Craig Thrasher, Portfolio Manager of the KAR International Small Cap strategy, joins Managing Director Jordan Greenhouse for a review of the stock market during Q1 2023, focusing on the impact of the March banking crisis.
Q1 2023 Stock Market Recovery Slowed by Banking Crisis
International Small Cap started the year riding the tailwinds of a recovery that began in late 2022. January data indicated inflation was slowing, which led to a relief rally in bonds and equities. By February, however, it became apparent inflation was on the upside, which slowed the stock market somewhat.
The most severe obstacle for investors came in March with the failure of Silicon Valley Bank and Signature Bank. The banking crisis caught the market off-guard, raising concerns about broader vulnerabilities in the banking sector. The collapse of Switzerland’s Credit Suisse Bank, which UBS ultimately purchased, increased these concerns.
The impact on international investing came in the form of renewed uncertainty. Thrasher notes the market has been “in the very early stages of unwinding the very easy monetary policies that have been in place for some time,” and concerns about the health of the banking sector are likely to continue into Q2 2023, despite the commitment of the central banks to taming inflation.
The International Small Cap Outlook for Q2 2023
High levels of inflation, central bank tightening, slower economic growth, and the threat of a global recession will continue to impact the stock market moving into Q2 2023. The war in Ukraine and geopolitical tensions between China and the USA are factors that also affect international investing. Thrasher notes trying to predict precisely how these multiple factors play out and interact is challenging, and it’s not surprising to see “markets whipsawing in different directions based on the most recent headlines.”
Volatile economic times, while difficult in the moment, may also provide opportunities for long-term investors. The focus of the KAR International Small Cap strategy has always been to seek high-quality businesses with the potential to weather periods of uncertainty and eventually out-grow their markets.
Listen to the podcast to learn more about International Small Cap performance in Q1 2023, or read our complete Q1 2023 market review where KAR CIO Doug Foreman reviews market performance and provides an outlook for what’s ahead in 2023.
This information is being provided by Kayne Anderson Rudnick Investment Management, LLC (“KAR”) for illustrative purposes only. Information contained in this material is not intended by KAR to be interpreted as investment advice, a recommendation or solicitation to purchase securities, or a recommendation of a particular course of action and has not been updated since the date of the material, and KAR does not undertake to update the information presented should it change. This information is based on KAR’s opinions at the time of the recording of this material and are subject to change based on market activity. There is no guarantee that any forecasts made will come to pass. KAR makes no warranty as to the accuracy or reliability of the information contained herein. Past performance is no guarantee of future results.