A Look Into What Shaped The Quarter

Q2’23 — Quarter in Review

The second quarter of 2023 (Q2’23) took off from the previous quarter with a lot to look at. A little flashback on the themes that have shaped the first quarter (Q1’23), we looked into how the market heavily revolved around inflation and subsequent rate hikes which ensued. In the first quarter, market sentiments are heavily shaped by inflation and the US Federal Reserve’s rate decisions.

Given how uncertain the market is from inflation, layoffs followed with institutions, especially in the tech and banking sectors, looking to shift their strategy to cope with a challenging and uncertain economic backdrop.

Aside from that, the banking crisis was sparked by the fall of Silvergate Bank and Silicon Valley Bank (SVB). SVB’s fall can also be partly attributed to its exposure to FTX, a disgraced crypto exchange. In this period, the banks were seeing massive outflow from panicked depositors going for massive withdrawals. The Federal Deposit Insurance Corporation (FDIC) was kept busy trying to keep these banks afloat, and to try and salvage whatever is possible from those who have sunk.

Amidst the turbulences, a particular issue has been riding high on the wind, and yes — we meant Artificial Intelligence (AI). Since ChatGPT’s launch, companies are crowding into the AI scene, especially those of generative AI. We have looked into how big tech firms dipped their feet into this industry and how the market responded positively to it.

Now, onto what shaped Q2/23:

Inflation

Like it or not, inflation is here to stay — in the market and in our quarterly reports. However, unlike the previous scene, where every decimal points matter, inflation is showing some positive feedback from the Fed’s barrages of rate hikes. US CPI inflation calmed to 0.1% MoM in May compared to April’s 0.4% MoM. The economy is seeing an interesting scene, a strong labor market against spiking rates on the backdrop of sticky inflation. Despite consistent rise in rates, the Fed gave the market some breathing room with a pause, but vigilance is still the name of the game as economists dub it as a “hawkish pause”.

Banking Sector

In an economy such as this, the banking sector remains an interesting sector to look at. This is the time that the market will be able to see bankers putting up some sweat. The panic from the first quarter did spill over into Q2’23, where this quarter saw First Republic Bank sitting under the spotlight. However, rather interestingly many of the banks reported increases in profits despite a rough first quarter. We’d love to take a look into what made it as such.

Artificial Intelligence

A quarter wouldn’t just end like that, and rightfully so when we speak of Q1’23. Perhaps the most renowned market sentiment that spilled from Q1’23 to Q2’23 is AI. The market hype over AI is still on a rampage, however, we can say that the blazing hype has resided from generative AI. The market is waking up from its ‘honeymoon’ period with AI, but they’re not sick of it. Instead, they look into AI with a conviction that this is a new realm worth exploring.

Debt ceiling

The market had a brush with another panic as US Treasury Secretary, Janet Yellen, revealed that the US is almost reaching its debt limit and the market will crash if nothing is done. Over a few weeks, market and political pundits stood shoulder-to-shoulder in watching how Democrats and Republicans sought to walk through their differences and reach an agreement that may have just saved the market just in time.

(Download the full report here)

Bottom Line

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