There was plenty happening again on the political scene in February. Trump appears to be following through on his plans for previously announced import tariffs after all. The realization grew that consumer prices and, with them, inflation expectations will rise. In response, US interest rates also initially rose. Gold prices moved higher again due to increased geopolitical uncertainty in the world. In Europe, following the elections in Germany, formation talks began and plans to invest more in defense were underway.
Shares
Strong differences were seen in equity markets last month. The MSCI All Countries World index (measured in euro) posted a negative return of -0.6%. Emerging markets just managed to record a plus for the month of February (+0.4%), where developed markets (-0.8%) wrote red numbers. These were led by North America (-1.6%), where Trump’s policies appear to be backfiring. Japan and Pacific excluding Japan (both -1.4%) did slightly less badly. Europe was the positive exception with a return of +3.6%.
Also in emerging markets, (Latin) America was the least performing region with a -1.9% return for the month of February. The EMEA and Asia regions posted small pluses (+0.4%) and China was the big winner in February (+11.7%). Style value stocks (+1.5%) performed much better than style growth stocks (-2.6%).
Bonds
Despite the rise at the beginning of the month, 10-year US yields still fell 0.33% on a monthly basis (from 4.54% to 4.21%). In Europe, the results were less significant: both the 10-year government bond yields of the Netherlands and Germany fell slightly (both -0.05% to 2.60% and 2.41% respectively). Bonds with a higher risk profile experienced slightly different price movements. The risk premium of less risky corporate bonds remained unchanged at 0.88%. More risky corporate bonds experienced an increase of 0.10% (to 2.99%), just slightly less than the increase in emerging market government bonds (+0.12% to 3.28%).