Q1 2023 - and even more specifically the month of March - can be summarized with one simple image...

Image via ZeroHedge

Bank crisis in US and EU, global war rhetoric rising, de-dollarization actions escalating, US layoffs exploding? Makes you wonder about the state of the dollar eh?

Source: Bloomberg

BUT Everything must be ok right - the S&P 500 is above pre-SVB levels (just ignore the bank stocks collapse)...

Source: Bloomberg

However, a bigger picture look paints a different picture as the dollar suffered its second straight quarterly decline) as Bitcoin soared over 70% and Gold jumped almost 9% (bonds and stocks were also higher in Q1)...

Source: Bloomberg

In equity-land, the divergence across the majors in Q1 is quite shocking as long-duration mega-cap tech (and trash) soared while Big-Caps (Dow) and Small-Caps (Russell 2000 - heavy with small financials) ended around unchanged.

That was the Nasdaq's best quarterly performance since Q2 2020 (and before that to Q1 2012)...

Source: Bloomberg

For the month, the Nasdaq is up over 8%, its biggest March advance since 2010. The Russell 2000 and Trannies were the ugliest horse in March's glue factory...

Source: Bloomberg

Dow surged to its best week since November, but Small Caps outperformed, up over 3%...

The last 3 Friday have seen fear over SVB, CS, & DB respectively, so 4th time was the charm this week with a major melt-up as early 0DTE negative delta flows (as the S&P broke above 2065 JPM Collar Call Strike) were rapidly unwound as stocks continued to squeeze higher and that accelerated the gains...

Source: SpotGamma

The S&P rallied all the way back up to the key 4100 level today...

The S&P 500's performance in Q1 was dominated by just 15 stocks...

In fact, it gets worse, according to Bianco Research, META, AAPL, AMZN, NFLX, GOOGL, MSFT, NVDA, TSLA account for all of the S&P's YTD return. They are up +4.6%. The other 492 stocks collectively are down for the year (-.99%).

Source: Bianco Research

Mega-Cap techs saw market caps soar with AAPL back above $2.5 trillion, MSFT back above $2 trillion, AMZN back above $1 trillion, and META and TSLA back above $500 billion...

Source: Bloomberg

Tech and Discretionary dramatically outperformed in Q1 while Energy and Financials lagged...

Source: Bloomberg

European markets were mixed in March with Germany and France ending green while UK was the biggest loser...

Source: Bloomberg

On the month, European banks are modest underperformers relative to US banks, but both are ugly...

Source: Bloomberg

March was a wake-up call for commercial real estate, as Office REITs crashed hard...

Source: Bloomberg

US growth stocks have dominated Q1, crushing value stocks (until this week when the ratio of Russell 1000 Value/ Growth hit the August lows). For context, this is the biggest growth/value quarter since Q1 2020 (and before that Q1 2009)

Source: Bloomberg

March saw bond vol (MOVE) explode relative to equity vol (VIX) - to the same extent as October 2008...

Source: Bloomberg

Thanks to March ugliness (and basically no issuance), corporate bond spreads in US and EU are wider in Q1 after blowing out wider in March, erasing all the compression from Jan/Fed...

Source: Bloomberg

While stocks bounced back above pre-SVB levels, the credit market remains much more stressed (even with the rally of the last 2 days)...

Source: Bloomberg

Q1 was a wild one for bonds with Treasury yields exploding higher on hawkish Fed realizations and then collapsing lower on safe-haven/recession anxiety over the bank crisis. Amid all the chaos, yields ended the quarter surprisingly grouped, down around 30bps or so (with the belly outperforming)...

Source: Bloomberg

March was a big month for the yield curve with its biggest monthly steepening since May 2013 (2s10s +32bps), ending Q1 unchanged...

Source: Bloomberg

Yields were all higher on the week (with the short-end underperforming)...

Source: Bloomberg

The market's expectations of The Fed's actions has swung violently in Q1 from a post-payrolls-beat, post-hawkish-Powell surge (expecting rates to  be over 100bps higher by year-end) to a post-SVB failure collapse (expecting rates to be almost 100bps lower by year-end). The quarter ends with coin-flip odds of one more rate-hike before The Fed is done and then cuts starting by September...

Source: Bloomberg

Interestingly, the short-term yield curve is ending Q1 just a little more dovish than it started it - having been dramatically more hawkish and dovish intra-quarter...

Source: Bloomberg

The dollar is set to end the quarter 1.4% lower, its first consecutive quarterly loss since 2020, amid easing concerns about the global banking sector and money market wagers on Federal Reserve interest-rate cuts. This is the 5th monthly drop in the dollar out of the last 6 months...

All the major cryptos had a good Q1, with Solana outperforming and Bitcoin gaining more than Ethereum (and that was in spite of 'Operation Choke Point 2.0')...

Source: Bloomberg

Bitcoin is up for the 3rd month in a row for its best quarterly gain since Q1 2021, back above $28,500 (and Ethereum is also up for 3 straight months (best Q since Q1 2021), nearing 7 month highs at $1850)...

Source: Bloomberg

NatGas was the standout commodity performance in Q1, collapsing 50% as warmer weather spoiled Putin's party plans. Gold was the quarter's best performer (along with copper - China reopening hopes) as crude closed lower...

Source: Bloomberg

Gold is up for the second quarter in a row (up over 19% in the  last 6 months - its best such gain since 2016), with its highest quarterly close in history. March saw gold rally almost 9% -its best month since July 2020 (topping $2000) once again...

Oil has been on a tear for the last two weeks with WTI back above $75, but remains down on the year, after breaking below its Jan/Feb range...

And finally, Q1 saw over $450 billion of inflows into Money-Market funds and over $300 billion in deposit outflows from US domestic banks...

Source: Bloomberg

And in case you were wondering what has sparked this sudden panic-buying in bonds, bullion, bitcoin, and big-tech? That's easy - The Fed!!! Just as we warned would happen mid-March...

It's the 'old QE' trade writ large. But what happens next (as The Fed balance sheet actually shrunk modestly last week) and Goldman's US Activity Index just dropped into contraction...

With recessionary signals growing louder, maybe pricing in some 'easing' by The Fed is 'fair' but that appears fully priced-in to stocks at near-record high valuations (esp. mega-cap tech).

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