Investment

February General Markets Comments

by Pierre Mouton

February General Markets Comments

“This world today is a mess” – Donna Hightower, 1972.

A slowdown (or a recession?) is expected, but economic releases do not support this projection yet; hard landing, soft landing or no landing (?); China is reopening, but underperforms; Oil is supposed to get scarcer, but do not rise; a weakening dollar is in everybody’s mind, but the greenback doesn’t seem to agree; long term yields rise, but Growth outperforms; Turkey is a NATO member and sends drones to help Ukraine, but also buys Oil and Gas from Russia; Chinese balloons fly over the US and its fighter jets circle around Taiwan; Mammoth Mountain in California has a 5 meters snow base, while Zermatt in Switzerland has 10 centimeters; and the list goes on. Yes, this world today is a real crazy mess.

Markets have a hard time performing well when too much uncertainties hover around; they wander even more when contradicting signals show up, which is clearly the case. The outcome of the conflict between Russia and Ukraine is anybody’s guess, but this might not be what drives market sentiment (although a severe escalation would undoubtedly trigger a massive sell-off); it is still Central Banks, monetary policies and interest rates which heavily weigh on the direction of markets, and in parallel the economic outlook.

Here again, making predictions often equals to betting on the black or the red at the roulette…

Even though markets struggled in February, they did resist somewhat, as only a fraction of the gains recorded in January were erased: the MSCI World abandoned 2.53% but is still up 4.3% year to date as an example; the S&P 500 lost 2.6%, the Nasdaq 0.5%, but the dollar was strong (+2.72% for the DXY), which can provide an explanation for the positive returns from the MSCI Europe and the Topix (+1.6% and +0.9%) and the MSCI Emerging Markets’ weakness (-6.5%). In the context of rising interest rates (+41 bps and +37 bps for the US and the German 10 year yields respectively) and falling Commodity prices (-2.3% for the WTI and -3% for the CRB Index), Gold logically fell (-5.3%). Credit enjoyed a second positive month in a row: the Itraxx Crossover advanced 0.5% last month and is now up 3.5% year to date.

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS PARTNERS SA provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data or other financial instruments referred to in this general comment. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the FINMA cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners Group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

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