As DB's Henry Allen writes, February was another very strong month for risk assets, with many major global stock indexes hitting new highs. That includes the S&P 500, which surpassed his 5,000 mark for the first time, and the Nikkei Stock Average, which surpassed its record since 1989. One of the reasons for this, he said, was the continued excitement around AI, with Magnificent 7 recording the best performance. within 9 months. But with inflation still above target and a surprise U.S. bull market, investors postponed future rate cuts and sovereign debt fell further. Additionally, regional banks in the United States continued to struggle as investors remained concerned about commercial real estate. When it comes to cryptocurrencies and Bitcoin, which soared almost 50% in February after the launch of a Bitcoin ETF, well, don't even get me started on Elizabeth Warren.
This Month in Review – High Level Macro Overview
There was some ongoing news related to the market in February.
- The first is that much of the world's data is still robust, continuing to hold out hope for a soft landing. For example, the January U.S. employment report showed non-farm payrolls increasing by +353,000, a positive revision over the past two months. Additionally, ISM manufacturing printing hit a 15-month high. However, despite growth remaining strong, there are further upside surprises in terms of inflation, raising concerns that the path to the target is unlikely to be smooth, with the economy likely to The question arose as to whether he would face a “landing”. Notably, the US Core CPI in January was +0.4% month-over-month, and his three-month annualized rate of Core CPI rose to +4.0%.
Inflation remains above target and growth remains strong, prompting investors to once again postpone future interest rate cuts. At the Fed, futures prices had factored in a 146bps rate cut by the December meeting, but they rose to 85bps, down 61bps from February. It also pushed back the likely first rate cut to its June meeting. As a result, sovereign bond yields rose further, with US Treasuries (-1.4%) posting their worst monthly performance since September. Similarly, in the eurozone, investors cut their expectations for a rate cut by December from 160 bps to 91 bps, with euro government bonds down -1.2%. Finally, in Japan, there are growing expectations that the Bank of Japan will end its negative interest rate policy as early as April, with the two-year government bond yield rising +9.7bps to 0.17%, its highest level since 2011. Recorded.
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- The second key story is the continued excitement surrounding AI, which has led to new performance improvements over Magnificent 7. Total returns increased +12.1%, the best monthly performance since May 2023, and Nvidia soared another +28.6% following strong earnings results to end the month. This helped propel the overall S&P 500 index (+5.3%) to its fourth consecutive month of gains, but gains remained narrow, with the equal-weighted S&P 500 index gaining +4.2% in February. It was a small thing.
- Third, concerns about commercial real estate persisted, particularly in early February. This comes after New York Community Bancorp reported a loss on Jan. 31 as it raised its expected loan losses for commercial real estate. This raised concerns that the full impact of rising interest rates has not yet materialized, especially given the amount of debt he will need to refinance from 2024 to 2025. For the market, that meant: U.S. regional banks have stalled further, with the KBW Regional Bank Index down another -2.8%, bringing the year-to-date decline to -9.5%. New York Community Bancorp led these declines, with a February profit of -25.2% and a year-to-date decline of -52.7%.
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Which assets made the biggest gains in February?
- stock: Excitement about AI and strong growth data led global stocks to rise for the fourth straight month, with the S&P 500 (+5.3%) and STOXX 600 (+2.0%) both rising. Asian indexes rose the most, with the Nikkei Stock Average rising +8.0% and the Shanghai Composite Index (+8.1%) posting his best monthly performance since November 2022.
- USD :The dollar index rose for the second consecutive month, gaining +0.9% as investors postponed the timing of future interest rate cuts. Additionally, the dollar appreciated against all G10 currencies except the Swedish krona.
- oil : Despite declines in other commodities, oil prices rose for the second consecutive month, with Brent crude up +2.3% and WTI +3.2%.
- cryptocurrency : It was a very strong month for cryptocurrencies. Bitcoin (+44.7%) posted its best monthly performance since December 2020, ending the month at $61,431.
Which asset had the biggest loss in February?
- sovereign debt : Sovereign bonds suffered further losses as investors postponed the timing of rate cuts. This includes US Treasuries (-1.4%), Eurosovereigns (-1.2%), and Gold Coins (-1.3%).
- JPY :The Japanese yen further depreciated by -2.0% against the US dollar in February, and by -6.0% year-to-date, making it the worst-performing G10 currency year-to-date.
- Daily necessities (excluding oil) : Several products saw significant declines in February. European natural gas fell by -17.8%, the fourth consecutive month of decline. Copper (-1.8%) also lost ground after three months of gains, while agricultural products such as wheat (-3.0%), corn (-7.3%) and soybeans (-7.7%) also declined. Did.
Finally, below is a graph summarizing February's major asset performance in local currency and USD.
…and since the beginning of the year.
Posted by: Zerohedge.com
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