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February Global Commentary: Markets Lose Steam on US Inflation Worries

Global Comments:

After a strong start to the year, global markets lost steam in February (MSCI World -2.4% MoM), with US employment and inflation data seemingly dashing investor hopes that the US Federal Reserve (Fed) was close to finished with rate hikes and would start cutting rates imminently. Data showing that the US added half a million jobs in January (more than twice consensus forecasts) and that US inflation slowed less than anticipated were a timely reminder that it was perhaps premature to declare a Fed victory over inflation. With interest rate markets moving to price in the possibility of at least a couple more Fed hikes over the next few months and a very low probability of any cuts in 2023, US 10-year bond yields climbed by 0.4% to 3.9%. Rising US yields also dragged the US dollar higher, with the greenback ending the month stronger against most major currencies as it more than reversed the weakness it had experienced in January.

Read more about the US Inflation rate here.


What Happened in February

By the end of February, most large US corporates had reported 4Q22 earnings, with S&P 500 earnings down c. 3% YoY in aggregate (or -7% YoY when removing the boost from the outsized profits generated by the energy companies). US large-cap tech stocks were amongst the few bright spots in February, extending a solid start to the year (NYSE FANG +3.8% MoM and +23.2% YTD), though with somewhat mixed results below the surface. Nvidia, Tesla and Facebook parent Meta all had a stellar month (+19%, +19% and +17% MoM, respectively), while Netflix, Amazon and Google parent, Alphabet, had a tough month (all down 9% MoM).

Emerging markets (EMs) fared even worse than developed market (DM) stocks in February (MSCI EM -6.5% MoM), with Chinese equities amongst the worst performing, particularly foreign-listed Chinese corporates. The Nasdaq Golden Dragon Index of US-listed Chinese corporates fell 11% MoM, with investors seemingly taking a breather after a 64% rally in those stocks in the three months leading up to February. Brent crude oil weakened marginally in February (-0.7% MoM), hovering around US$80/bbl for the third consecutive month.

Find out more about our Local Economic comments for February here.

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WEBINAR | The Navigator – Anchor’s Strategy and Asset Allocation, 2Q24

Anchor CEO and Co-CIO Peter Armitage will host the webinar, provide an introduction to current global and local market conditions and give his thoughts on offshore equities. Together with Head of Fixed Income and Co-CIO Nolan Wapenaar, Pete will also discuss Anchor’s strategy and asset allocation for 2Q24, focusing on global equities and bonds. In addition, Fund Manager Liam Hechter will provide insights into local equities, highlighting some investment ideas; Global Equities Analyst James Bennet will discuss Ferrari and give an update on Tesla, and finally, Analyst Thomas Hendricks will participate in a Q&A with Peter, explaining the 10-year US Treasury to attendees.