The month of February was a mixed to positive among a broad sample of assets.
On the one hand the month saw those assets more sensitive to Trump’s proposed policies continue performing solidly despite some uncertainty still about what to expect from the new President. On the other hand, Euro assets have largely underperformed likely reflecting some concern about the upcoming European elections and particularly those in France and Italy. That’s despite economic data holding up relatively well. Another theme which has been consistent through much of the month has been the incredibly low level of volatility across the vast majority of asset classes even with the political uncertainty.
According to Deutsche Bank, it has seen 35 of its 39 assets finish the month with a positive return in local currency terms, but just 26 assets in dollar terms with the weaker Euro (-2%) and Pound (-2%) helping to prop up local currency returns.
Looking closer at performance during the month, the top 6 performers in the sample in dollar terms are the Bovespa (+4%), Silver (+4%), S&P 500 (+4%), Greek equities (+3%), Gold (+3%) and EM equities (+3%). It’s interesting to see that despite 4 of those 6 assets being equity markets (and 2 of which being EM), the fact that Gold and Silver have still done well this month suggests that there is still a desire to have flight to quality and tail risk (or relation) hedges in place.
Equity markets in Asia have also had a reasonable month with the Shanghai Comp (+3%), Hang Seng (+2%) and Nikkei (+1%) all up. It’s a slightly mixed story in Europe though. While the Stoxx 600 (+1%) and DAX (+1%) have just about stayed onside European Banks, French equities and Italian equities are all in the 0% to -4% range.
A similar theme has played out in bonds too. In dollar terms Gilts (+2%) and Treasuries (+1%) have evidently benefited from the relative safety flight while BTP’s (-1%), Spanish Bonds (-2%) and OATs (-1%) are all weaker despite a strong end to the month. Interestingly Bunds (-1%) had a slightly weaker month too in dollar terms, although the weaker Euro helped support a +2% gain in local currency terms. Like their equity counterparts, EM bonds (+2%) have also had a strong month. Credit markets tell a similar story. US credit delivered returns in the +1% to +2% range with higher beta HY and Fin Sub sitting atop. In dollar terms however EUR IG Non-Fins, Fin Sen, Fin Sub and HY are all -1% over the month and sit in the bottom quartile of our table even if local currency returns were not much less than the US. The only asset class left to mention is commodities. Along with Silver and Gold, it’s all been a solid month for WTI (+2%), Brent (+1%), Corn (+2%) and Wheat (+1%) while Copper (-1%) has had a slightly more underwhelming month.
Here is the summary asset return for February in local and USD terms…
… and YTD.
Source: Deutsche Bank