February in review

Global equities continued their strong start to the year amid fresh evidence of a robust US economy and a slew of impressive earnings releases. Several indices closed at record highs. The S&P 500 breached the 5,000 mark for the first time as part of its fourth straight monthly advance, while in Japan, the Nikkei 225 passed its all-time high set in 1989. In part, that was because of continued excitement around AI, driven by Meta’s earnings at the start of the month and Nvidia’s results towards the end. The US economy remained in vigorous health, with the jobs report for January showing nonfarm payrolls up by 353,000, nearly twice the anticipated level, along with positive revisions to the previous two months. This raised the prospect that the economy might not face a recession after all. Investors also scaled back bets that the Federal Reserve will begin cutting interest rates in May after data showed US inflation eased less than expected in January to 3.1%.

Asian indices saw the largest gains, with the Nikkei and the Shanghai Comp leading the way. The latter posted its best monthly performance since November 2022 amid government support and an uptick in sentiment. Meanwhile, the conflict in the Middle East continued with no signs of a ceasefire, with cargo transportation through the Red Sea remaining disrupted. In terms of sectors, economically sensitive pockets of the market such as consumer discretionary and industrials outperformed, along with tech, while more defensive spaces including consumer staples lagged, as did utilities and real estate given the higher rate expectations.