Monthly commentary – Review of February 2024

3 minute read

Our market summary

While global equities delivered robust gains in February, bond markets retreated as investors pared back expectations for interest-rate cuts in the face of stronger than expected inflation and economic data. Buoyed by the same resilient economic data, strong US company earnings numbers and a sharp bounce in Chinese equities following the latest raft of policy initiatives, global equities delivered 5%. China was the top-performing regional equity market. Its return of 9.1% boosted Asian and emerging markets. Meanwhile, bond prices fell with US Treasuries and UK gilts among the worst casualties.

US

Despite US inflation remaining higher than expected, with five of the Magnificent Seven reporting earnings, and exceptional share-price gains for the likes of Meta and Nvidia, major US equity indices continued to register new all-time highs. US equities gained 6.1% in a month when 75% of US companies to report earnings, beat analysts’ expectations. Consumer discretionary and industrial stocks led the market while defensive sectors trailed.

Europe

Europe’s equity markets trailed developed markets but still returned 2.7%. Along the way, European market indices passed new record highs, surpassing those set more than two years ago. The renewed excitement toward AI stocks helped to lift Europe’s technology stocks late in the period. Consumer discretionary and industrial stocks also outperformed while more interest-rate sensitive areas, such as real estate and utilities, trailed.

UK

UK equities eked out a 0.4% gain in the face of a technical recession after UK GDP shrank 0.3% in the last quarter of 2023 (to deliver two consecutive quarters of decline). Meanwhile, UK inflation remaining steady at 4%, and strong wage growth, deterred hopes of interest-rate cuts while analysts cut their UK profit forecasts. Industrial, financial and consumer discretionary stocks made modest gains while consumer staples, real estate and materials stocks declined.

Emerging markets

Chinese equities bounced back from five-year lows to deliver 9.1%, thanks to Chinese New Year spending, cuts to mortgage rates, curbs on short selling and major stock purchases by state-owned entities. This boosted emerging markets, which gained 5.5%. Korea, Taiwan, and Saudia Arabia were among the top performers as were Peru, Chile, and Poland. India, Brazil, South Africa, Greece, and Turkey all underperformed the broader emerging market index.

Fixed income

Although annual US consumer price inflation (CPI) dropped to 3.1% in January, from 3.4% a month before, the smaller than expected decline piled more pressure on government bonds as investors re-appraised the outlook for interest-rate cuts. US Treasuries fell more than 1% while UK gilts retreated due to robust wage growth, which likewise impacted the likelihood of interest-rate cuts. Although corporate bonds fared better, they still declined slightly.

Source: Quilter Investors as at 29 February 2024. Total return, percentage growth in pounds sterling except where shown, rounded to one decimal place. The performance shown for global equities is represented by the MSCI AC World Index; developed market equities by the MSCI World Index; US equities by the MSCI USA Index; European equities by the MSCI Europe ex UK Index; UK equities by the MSCI United Kingdom All Cap Index; UK smaller companies by the MSCI United Kingdom Small Cap Index; emerging markets by the MSCI Emerging Markets Index.

Marcus Brookes

Chief Investment Officer & Managing Director

Marcus is chief investment officer and managing director of Quilter Investors. Marcus joined Quilter Investors in December 2021 from Schroders Personal Wealth, where he also held the role of chief investment officer. He has considerable investment management experience with a deep understanding of the multi-asset sector having managed multi-manager fund ranges for more than 20 years.

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