Market Updates
Oliver Stone
February was another month of shifting dynamics in global markets, shaped by a mix of trade tensions, geopolitical uncertainty, and evolving policy expectations. Investor sentiment remained cautious as fresh U.S. tariffs targeted China, Canada, and Mexico, while diplomatic and political developments added to the complexity of the broader macroeconomic landscape.
Equity markets navigated these uncertainties with resilience in some cases, though performance varied by region. In the UK, stocks edged higher, supported by a more stable currency environment and strength in defensive sectors like consumer staples and utilities. Large-cap stocks outperformed their smaller counterparts as investors continued to favour established companies with strong balance sheets in a period of uncertainty. Across the Atlantic, U.S. markets carried their post-election momentum forward, though small caps struggled here too as concerns around tariffs and trade-sensitive sectors took hold.
Elsewhere, Chinese equities were by far the strongest performers over the month, driven higher by improved sentiment following more government pronouncements of support, and positivity following last month’s Deepseek announcement:
The bond market had its share of volatility, with government yields rising early in the month before stabilising as economic data came in softer than expected. In the U.S., concerns over higher spending and potential inflation pressures initially pushed yields higher, but by the latter half of February, those fears eased somewhat. Meanwhile, European bonds held firm, as investors sought safety amid political uncertainty in Germany, where the incumbent government was swept aside in elections. Credit markets remained relatively calm, with investment-grade corporate bonds attracting demand.
Currency markets reflected the broader themes playing out across economies. The U.S. dollar weakened as global trade risks grew, driven by President Trump’s wayward policy announcements. Sterling appreciated against most major currencies as GDP data surprised to the upside. The one currency it didn’t strengthen against was the Japanese yen in (-1.6%) as we saw hawkish comments from the Bank of Japan around interest rate rises, some very strong consumer spending & wages data, and some risk aversion coming back into market, for which the yen is a classic haven.
Trade remained a major point of focus, with the U.S. administration pushing forward with its plans to increase tariffs. A new 10% levy on Chinese imports, effective from early March, added to supply chain concerns, while additional tariffs on industrial metals are set to follow later in the month. Canada and Mexico were also hit with fresh trade restrictions, and there is growing speculation that European exports may soon face similar treatment. Investors will be watching closely to see if these measures escalate into broader retaliatory actions, particularly from China and the EU.
Beyond trade, geopolitical tensions showed no signs of easing. The Russia-Ukraine peace talks stalled, and with the risk of the U.S. withdrawing some level of support, uncertainty around the region deepened. In Europe, Germany’s elections reshaped the political landscape, and while coalition negotiations are ongoing, early signals point to a shift toward higher government spending and more pragmatic economic policies. Markets have so far reacted cautiously, waiting for further clarity.
Against this backdrop, as always, avoiding knee-jerk reactions to short-term market noise remains critical, and our portfolio positioning remains focused on stability, and long-term resilience through diversification.
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The value of investments may fluctuate in price or value and you may get back less than the amount originally invested. Past performance is not a guide to the future. The views expressed in this publication represent those of the author and do not constitute financial advice.
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