March 2009 was a positive month for equity markets with the MSCI World Index up 2.9%. All major regions posted positive returns, with Asia the best performing region during the month.

Progress through the month was very volatile however. In early March the S&P fell to a twelve year low as investors focused on the stream of poor economic and banking news. From mid March, markets turned around to rally strongly.

The rally was driven in part by news from the US. A $1.15 trillion injection into the financial system by the Federal Reserve was announced in an effort to unfreeze credit markets and tackle the deepening recession.

The question now is whether the recovery in markets is merely a short rally in a continued bear-market, or the beginning of a sustained bull market. Many commentators are of the belief that the former is the reality with volatility and nervousness to remain in markets for some months yet.

There are some ‘green shoots’ beginning to appear in the form of positive economic data. New homes sales in the US were surprisingly better than expected during the month. A number of confidence indicators also appear to have picked up in recent months, albeit from a very low base. This may be very early signs that at least a stabilisation in the global economy is emerging.

Back home, the Irish banks rallied strongly in percentage terms. However, this had little or no effect on the ISEQ index, as banks now make up a very small part of the Irish market. CRH alone makes up over 40% of the index.

At the end of the month, the automobile sector in the US replaced banks on the front pages. The major US automobile companies are again close to bankruptcy and in need of further support from Obama’s administration.

Source – KBC Asset Management