{"id":19713,"date":"2025-03-07T16:07:18","date_gmt":"2025-03-07T16:07:18","guid":{"rendered":"https:\/\/theprogenygroup.com\/knowledge-hub\/market-insight-february-2025\/"},"modified":"2025-04-11T16:10:30","modified_gmt":"2025-04-11T16:10:30","slug":"market-insight-february-2025","status":"publish","type":"post","link":"https:\/\/theprogenygroup.com\/en-be\/knowledge-hub\/market-insight-february-2025\/","title":{"rendered":"Market insight | February 2025"},"content":{"rendered":"\n

After a positive January, February saw a reversal in larger US companies returns on the back of uncertainty over the US government\u2019s policy agenda, which acted as a headwind to both consumer and corporate sentiment. However, other major growth asset markets made headway.<\/strong><\/p>\n\n\n\n

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The UK and the European equity markets showed a positive trend, as perhaps cheaper valuations do matter when interest rates look to be cut.<\/p>\n\n\n\n

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THE ECONOMIC PICTURE<\/h2>\n\n\n\n

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Starting with the economic picture, inflation data in the US and UK surprised to the upside in January, with headline figures of 3%. It was more worrying in the States, where analysts pointed to a core rate of 3.5%, with autos, food, electricity and insurance all important factors even before tariffs have an effect.

Despite the ability for tariffs to increase inflation and the January inflation data, markets remain focused on sentiment and the risks to growth.

February saw both business and consumer sentiment weaken. Services activity and small business investment intentions both dropped, while consumer confidence recorded its largest fall since August 2021.

At present the markets are pricing in only 1-2 rate cuts by the US Federal Reserve in 2025, versus 3-4 cuts in the UK and Europe. It is not surprising that the Federal Reserve is hinting that interest rate declines will be limited, whilst The Bank of England cut rates in February and hinted at more to come in the coming months.<\/p>\n\n\n\n

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GROWTH ASSETS<\/h2>\n\n\n\n

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Turning to growth assets, European equities outperformed the US in February as investors factored in the likelihood of a ceasefire in Ukraine, along with a strong performance from financials. In comparison, US equities were hindered by continued worries about the valuations of the \u2018Magnificent 7\u2019 technology stocks.

Asian equities rose 1.1% over the month, driven by Chinese stocks which rose 11.7% in dollar terms. Enthusiasm about AI company DeepSeek continued to support the broader Chinese tech\u2019 story. Japan was the regional outlier as the yen-sensitive market suffered as the currency appreciated by 2.8% against the dollar.<\/p>\n\n\n\n

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FACTOR PERFORMANCE<\/h2>\n\n\n\n

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Moving to factor performance, the positive returns in both European and UK markets reflected in the Value factor, which was the best performer over the month.

In contrast both Small-Cap and Growth were the relative underperformers as global small cap stocks delivered negative returns on wider growth concerns.<\/p>\n\n\n\n

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DEFENSIVE ASSETS<\/h2>\n\n\n\n

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Turning to Defensive assets, all major fixed income sectors delivered positive returns over the month, as falling US yields fed through to other parts of the market.

Strong corporate fundamentals helped investment grade bonds over the month.<\/p>\n\n\n\n

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SUMMARY<\/h2>\n\n\n\n

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In summary, investors remain focussed on whether high earnings expectations are justified, along with the risks to growth in the US.

The rise in European equities highlighted the importance of regional divergence, while the positive returns in defensive assets show that bonds can once again protect against equity losses.

With US led uncertainties ahead, investors should remain diversified to protect portfolios against any further volatility in the coming months.<\/p>\n\n\n\n

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Glossary<\/strong>:<\/p>\n\n\n\n

Asset Markets<\/strong> \u2013 Markets where financial assets such as stocks, bonds, and commodities are bought and sold.<\/p>\n\n\n\n

Business Sentiment<\/strong> \u2013 The outlook and confidence levels of businesses regarding the economic environment and their future prospects.<\/p>\n\n\n\n

Consumer Confidence<\/strong> \u2013 A measure of how optimistic or pessimistic consumers are about their financial situation and the overall economy.<\/p>\n\n\n\n

Core Inflation Rate<\/strong> \u2013 A measure of inflation that excludes volatile items such as food and energy prices to provide a clearer picture of underlying inflation trends.<\/p>\n\n\n\n

Defensive Assets<\/strong> \u2013 Investments, such as bonds, that are considered lower risk and provide stability during economic downturns.<\/p>\n\n\n\n

Economic Picture<\/strong> \u2013 A broad overview of economic conditions, including inflation, growth, employment, and monetary policy.<\/p>\n\n\n\n

Equities<\/strong> \u2013 Shares of companies traded on stock exchanges, representing ownership in those businesses.<\/p>\n\n\n\n

Factor Performance<\/strong> \u2013 The return characteristics of specific investment styles or factors, such as Value, Growth, or Small-Cap.<\/p>\n\n\n\n

Federal Reserve (Fed)<\/strong> \u2013 The central bank of the United States, responsible for monetary policy, including setting interest rates.<\/p>\n\n\n\n

Fixed Income<\/strong> \u2013 Investments that provide regular income payments, such as bonds.<\/p>\n\n\n\n

Growth Assets<\/strong> \u2013 Investments with the potential for capital appreciation, such as stocks and real estate.<\/p>\n\n\n\n

Growth Concerns<\/strong> \u2013 Market worries about slowing economic expansion, which can impact corporate earnings and investment performance.<\/p>\n\n\n\n

Headline Inflation<\/strong> \u2013 The total inflation rate including all goods and services, including food and energy prices.<\/p>\n\n\n\n

Inflation<\/strong> \u2013 The rate at which the general level of prices for goods and services rises, eroding purchasing power.<\/p>\n\n\n\n

Interest Rates<\/strong> \u2013 The cost of borrowing money, typically set by central banks to influence economic activity.<\/p>\n\n\n\n

Investment Grade Bonds<\/strong> \u2013 Bonds issued by corporations or governments that have a high credit rating, indicating lower risk of default.<\/p>\n\n\n\n

Monetary Policy<\/strong> \u2013 Actions taken by central banks to control inflation, manage employment levels, and support economic growth, often through interest rate adjustments.<\/p>\n\n\n\n

Rate Cuts<\/strong> \u2013 A reduction in interest rates by central banks to stimulate economic activity.<\/p>\n\n\n\n

Regional Divergence<\/strong> \u2013 Differences in economic or market performance across various geographic regions.<\/p>\n\n\n\n

Sentiment<\/strong> \u2013 The overall attitude or mood of investors, businesses, or consumers towards financial markets or the economy.<\/p>\n\n\n\n

Small Business Investment Intentions<\/strong> \u2013 A measure of how much small businesses plan to invest in expansion, hiring, or capital expenditures.<\/p>\n\n\n\n

Small-Cap Stocks<\/strong> \u2013 Shares of smaller publicly traded companies, typically with market capitalizations under $2 billion.<\/p>\n\n\n\n

Tariffs<\/strong> \u2013 Taxes imposed on imported goods, which can affect prices, trade flows, and inflation.<\/p>\n\n\n\n

Value Factor<\/strong> \u2013 An investment style that focuses on stocks perceived to be undervalued based on financial metrics such as price-to-earnings ratios.<\/p>\n\n\n\n

Volatility<\/strong> \u2013 The degree of variation in asset prices over time, indicating risk and uncertainty in financial markets.<\/p>\n\n\n\n

Yields<\/strong> \u2013 The income return on an investment, typically expressed as a percentage, such as the interest earned on a bond.<\/p>\n\n\n\n

\u2018Magnificent 7\u2019 Technology Stocks<\/strong> \u2013 A term used to refer to a group of dominant US technology companies with significant market influence.<\/p>\n\n\n\n

Yen-Sensitive Market<\/strong> \u2013 A stock market or economy that is highly influenced by movements in the Japanese yen.<\/p>\n\n\n