February general market comments

“Duel” – Propaganda, 1985

In politics and geopolitics, it often feels like duels prevail: East/West, North/South, Left/Right, Democracy/Dictatorship, Liberalism/Collectivism… And in financial markets too: Bulls/Bears, US/RoW, Developed Markets/Emerging Markets, Large Caps/Small Caps, Growth/Value, Public Markets/Private Markets, Fixed Income/Equities, Gold/Fiat, and the list goes on.

February 2025 has been an eventful month for both geopolitics and markets: whatever the outcome, it seems we might get closer to a peace deal in Ukraine, and if there’s no clarity yet, the Middle East situation evolves rapidly, while markets have performed disorderly, showing some signs of reversals from here to there in the famous duels mentioned above.

First, the longstanding convergence between Italian and German yields blew up, temporarily or not, with a 52 bps spread widening between both last month. Then, after a spectacular rally, Bitcoin’s momentum came to a screeching halt as the crypto lost 17.5% for the month. Perhaps more importantly, in the context of a stable dollar versus the euro, European equity markets largely outperformed the rest of the pack: the Stoxx 600 added 3.3% in February and is now up 9.8% year to date, which can be compared to -1.42%/+1.24% for the S&P500, -3.82%/-3.69% for the Topix and +0.35%/+2.02% for the MSCI Emerging Markets.

Europe tends to be seen as a Value play, with large weightings in Financials, Energy, Staples and Utilities, which can explain the strong show from European equities, corroborated by another reversal in the secular duel between Growth and Value: the MSCI World Growth lost 2.89% in February and is down 0.33% year to date, while the MSCI World Value returned 1.43% and is up 5.89% for the year.

Most S&P 500 companies have reported their Q4 2024 results, and a striking fact is that, for once, the Magnificent 7 struggled in terms of performance; results and outlooks were mostly fine, but Meta is the only member of the club showing a positive return year ta date; what a difference when compared with the last 2 years!
Finally, Gold shone again and added 2.12%, Oil tumbled 3.82%, and Credit posted a decent month with a +0.43% return for the Itraxx Crossover, in the midst of very narrow spreads.

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