Mark Barnes
Christine Haggerty
Stocks, bonds and key commodity prices broadly fell in February as investors revised up expectations for policy rate peaks amid surprisingly resilient inflation and global economic data. As we cover in our latest Performance Insights report, the late-month resurgence in bond yields and US dollar underpinned big reversals in market and sector leadership from the previous month.
Amid a late-month uptick in volatility and risk aversion, equities in the UK, Europe and Japan ended February modestly higher in local currency terms, while developed peers in Asia Pacific and the US finished lower. In the US, small caps held up modestly better than the large-cap index. The Emerging index suffered even bigger losses than developed peers as many of its largest markets gave back some recent gains, notably China, Brazil and India (down 10%, 6.9% and 3.8%, respectively).
Global equity returns (%) – One month and 12 months ended February 28, 2023
Source: FTSE Russell. Data as of February 28, 2023. Past performance is no guarantee to future results. Please see the end for important disclosures.
The February U-turn in equities reshuffled market leadership across regions. With their February gains, UK, Europe and Japan extended their 12M outperformance versus the FTSE All-World index, while the downturn in Asia Pacific reversed that market’s advances since last October. The Emerging and US indexes remained laggards for both periods.
Regional index returns relative to FTSE All-World (rebased, TR, local currency)
Source: FTSE Russell. Data through February 28, 2023. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
Of the four largest emerging markets, only Taiwan continued to gain ground over the FTSE All-World in February. China’s February losses erased nearly all its advances versus the global index since late December.
Select FTSE Emerging Country returns relative to FTSE All-World (rebased, TR, local currency)
Source: FTSE Russell. Data through February 28, 2023. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
US underperformance versus its overseas peers was broad-based, as seen in the February breakdown of the top and bottom 10 contributions to returns below. Only two sectors contributed meaningful gains to the US index for the month, and its losses among the bottom 10 sectors were far bigger across the board.
Top and bottom 10 sector contributions to returns – One month ended February 28, 2023
Source: FTSE Russell. Based on Industry Classification Benchmark (ICB) data as of February 28, 2023. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
The chart below provides more detail on the give-and-take between the two markets: The bulk of the US’s lackluster relative performance came from lagging contributions in pharmaceutical & biotechnology, and bigger declines in retailers and oil & gas stocks. These setbacks more than offset the stronger contributions from US autos (light blue line) and its huge overweight in technology (green line), the only US stock group of the 11 FTSE Russell industry indices to post a gain in February.
FTSE USA sector returns relative to FTSE All-World sector returns (rebased, TR, local currency)
Source: FTSE Russell. Based on Industry Classification data through February 28, 2023. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
For more on how global equities have fared recently, please see our latest Performance Insights report.
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