Market Review - February 2023
Source: Zephyr Style Advisor
Inflation, the Federal Reserve’s (Fed) response to it, and recession fears led markets lower in February, reversing gains from January. Major equity markets suffered for the month, with emerging markets hit the hardest with a decline of 6.5%. China and Brazil were the primary detractors, falling 10.4% and 9.2%, respectively, owing to weakness in commodities and likely geopolitical tensions that drove profit-taking after strong gains from October ‘22 lows.
Within US equities, all sectors except technology declined. Traditionally defensive sectors, such as utilities, fell 5.9%, while the beat-up technology sector gained 0.4%. Energy was the worst-performing sector and fell 7.1%. Within equity sizes and styles, value and larger stocks fared worse than faster-growing, and small-cap stocks.
Interest rates climbed in February as the Fed remarked that more rate hikes were likely needed to tame inflation. Short-term US treasury bonds were the lone positive performer in fixed income with a 0.3% return, while long-term treasuries declined 4.7%.
Broad commodities declined 4.7%. Silver was the weakest performer, falling 12.1%, and gold was down 5.2%. The US dollar was the one positive performer for the month, gaining 3.3%, as investors weigh the possibility of higher interest rates. Lastly, real estate fell due to higher potential interest costs.
While the global 60/40 index blend fell 3.0% in February, it is still up 2.4% for the year. For the month, allocations to equities helped, while bonds, REITs, commodities, and gold hurt.
Source: Zephyr Style Advisor
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