Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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February market performance: are we walking on concrete or shaky ground?
Market Rewind
Søren Otto Simonsen
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.
For the fourth consecutive month, the global equity market posted positive returns of 4.1%. February was a month dominated by strong earnings and key figures that pushed both recession worries, and rate cut expectations further into the future. The question is whether this path is solid or rocky and unstable with a real risk of falling over.
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.
Check out the rest of this month’s performance figures here:
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.
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