March Market Insights

Despite volatility, markets gain in March, rounding off a positive first quarter.

Article published: April 10, 2023

By: Neil Gilfedder, CFA® Chief Investment Officer

What happened

Much of the stock market managed a positive month in March, despite volatility caused by turmoil in the banking sector. Both large-cap domestic and international stocks finished up; large-cap U.S. stocks (S&P 500) rose by 3.7% for the month, while developed-market international stocks rose by 2.5% and emerging-market stocks by 3.1% (MSCI EAFE and Emerging Markets indexes). Small-cap U.S. stocks fell by 5.2%, driven by their exposure to regional banks. The Bloomberg U.S. Aggregate Bond Index was up by 2.5%. It was another volatile month for stocks, with the S&P 500 moving by more than 1% (plus or minus) on 11 of March’s 23 trading days.

Why it happened

Since 2022, we’ve seen the Federal Reserve raising interest rates to cool inflation while trying to avoid harming the economy.  As well as looking at the inflation rate itself, markets have been weighing factors that affect inflation, such as job creation and economic growth, looking for clues to the Fed’s next move.  As different data has pointed in different directions, markets have been volatile. This month, there were concerns about the banking sector at home and abroad. While these have been contained, at least for now, by aggressive government action, this has complicated the Fed’s task. As well as trying to bring down inflation and avoid a recession, it now also must consider the possible negative impact on banks when it raises interest rates.

The Fed raised its target interest rate by 0.25%, in line with expectations from most investors. The Fed also addressed stability in the banking system during its meeting. Over the month, that issue had dampened optimism about the Fed successfully engineering a “soft landing” – a slowing of inflation without hampering economic growth to the point of recession.

On the inflation front, the consumer price index rose in line with market forecasts, posting its lowest reading since September 2021. The labor market seemed to slow slightly as well, with unemployment figures edging up slightly, and above market expectations. Manufacturing declined, but by less than it has been.

What it means for you

The balancing act of economic growth, inflation and interest rates is still very much at the forefront of what’s driving markets. As long as that balancing act continues, we should expect to see ongoing volatility. This underscores the importance of having a long-term strategy that can withstand short-term market movements and – as we saw with the banking stocks falling and tech stocks rising in March – performance can vary widely between sectors, showing the importance of portfolio diversification.

An index is a portfolio of specific securities (common examples are the S&P, DJIA, NASDAQ), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance does not guarantee future results.


Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. There are no guarantees that a diversified portfolio will outperform a non-diversified portfolio. Past performance is not indicative of future results.


This material was prepared for informational and/or educational purposes only.  Although the information has been gathered from sources believed to be reliable, we do not guarantee its accuracy or completeness.

Neil Gilfedder, CFA®

Chief Investment Officer

As executive vice president of investment management and chief investment officer, Neil oversees the team that manages investments for all Edelman Financial Engines clients. Neil directs the investment management operations and evolution of our proprietary investment methodology. Neil received a bachelor's degree in philosophy and economics from the University of York and a master's degree in economics from Stanford University.