Defensive equities, high-grade fixed income, gold to outperform amid US banking system concerns

MARKET analysts expressed fresh concerns about uncertainties in US’ banking system, following US Treasury Secretary Janet Yellen’s comments about not considering any plans to insure all US bank deposits. Yellen’s comments overshadowed a dovish 25-basis-point rate hike by the Federal Open Market Committee (FOMC), sending riskier assets down.

“We see stock market choppiness as investors contemplate between a likely peak in interest rates soon and the Straits Times Index’s low forward price-to-earnings valuation, offset by concerns over the stability of the US banking system,” DBS analysts said in a note on Thursday (Mar 23).

DBS noted a fall in two-year treasury yields to 3.94 per cent, which suggests markets believe interest rates are peaking. Federal fund futures show 50:50 odds for one final rate hike at the next FOMC meeting in May.