Senior Investment Editor
Summary: February performance was green almost across the board, cementing a strong start to 2024 on the financial markets. But the doubts about the long-term trajectory of the economy are still there and it begs the question how stable the foundation is.
All regions posted positive returns for February. The US leads the pack with a return of 5.2%. This comes as the result of a strong earnings season where mega-cap companies like Nvidia and Meta pulled the biggest load, climbing in the ballpark of 25%.
The Asia and Emerging Markets regions returned 3.9% and 4.6% respectively. Those numbers come primarily from the positive performance in China. China is generally challenged but has seen some positive momentum since Lunar New Year. For the Asia region, Japan has also contributed to the green figures.
Europe came in last but still with a nice return of 1.8%. The index we track is mainly pulled down by UK performance, whereas mainland Europe has had a solid month. Large companies like Novo Nordisk and ASML also pulled Europe in the right direction albeit at a slower pace than the mega-caps in the US.
After a negative return in January, consumer discretionary is the best performing sector in February, with a return of 7.5%. It can be suggested that this is a signal along the lines of the market pushing rate cut expectations further into the future, i.e. that if the economy is showing it’ll be later in the year.
Information technology returns 6.1% based on companies like Microsoft performing well. Industrials came third with 5.6%.
Utilities was the worst-performing sector and the only in minus, falling by –1.3%.
The bond indices we tracked all came in negative in February. This poor performance is because investors have been pushing against the expectation of interest rate cuts in March and April. At the beginning of the year, bond futures were pricing 7 rate cuts both in the US and in Europe. Now they are pricing 3 rate cuts in the US and 4 in Europe.
Sources: Bloomberg and Saxo
Global equities are measured using the MSCI World Index. Equity regions are measured using the S&P 500 (US) and the MSCI indices Europe, AC Asia Pacific, and EM respectively. Equity sectors are measured using the MSCI World/Sector] indices, e.g., MSCI World/Energy. Bonds are measured using the USD hedged Bloomberg Aggregate Total Return indices for total, sovereign, and corporate respectively. Global Commodities are measured using the Bloomberg Commodity Index. Oil is measured using the next consecutive month’s WTI Crude oil futures contract (Generic 1st CL Future). Gold is measured using the gold spot dollar price per ounce. The US Dollar currency spot is measured using the Dollar Index Spot, measuring it against a weighted basket of the following currencies: EUR, JPY, GBP, CAD, SEK, and CHF. Unless otherwise specified, figures are in local currencies.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
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