February went by in a blur, but what a month it was. PortfolioMetrix had their best month ever in terms of new money flows as well as, when combined with market performance, their best ever month over month AUM increase. And to cap it off, just after month-end, PortfolioMetrix picked up the Citywire Wealth Manager Regional Star Award.
Over the course of February, survey data around the world powered to new highs, indicating strong economic momentum. In addition, comments from the Fed on possible imminent rate rises were taken as evidence of further economic strength, which contributed to strong gains in equities.
The Bank of England kept rates on hold at 0.25% as expected but upgraded its growth predictions for the UK economy. Forecasts for 2017 were upgraded from 1.4% to 2% although it expects growth to moderate to 1.6% in 2018 as inflation, expected to hit 2.7% by year end, squeezes household spending. Inflation hit 1.8% during January, its highest level since June 2014.
The US Federal Reserve kept its key rate at a range of 0.5%-0.75% at its meeting at the beginning of February. Broadly neutral messaging after the meeting became more and more hawkish as positive US data rolled in, culminating with Fed Chair Janet Yellen’s testimony to Congress about raising rates ‘fairly soon’ if inflation and unemployment data continued to perform as expected. These comments were taken by the market to be an endorsement of US economic performance. A rate rise in March is now almost completely priced in. Disappointing 4Q growth results at month end only dampened market performance slightly – the US economy grew at only 1.9% vs annualised 3.5% in the third quarter.
Sentiment in Europe was again blunted by fresh discord over Greece’s financial bailout with the IMF threatening to pull out of the process over other European countries refusal to grant additional debt relief which it argues is crucial. For their part, European leaders are reluctant to make further concessions ahead of key elections in the Netherlands, France and Germany. The campaigns for these elections continue to generate their own news flow, although as yet polling continues to show a low likelihood of overall victory for far right Geert Wilders in Dutch elections or Marine Le Pen in French presidential elections.
Japan posted annualised growth of 1% during 4Q 2016 as well as overall growth of 1% in 2016 (vs 1.2% in 2015). Weaker consumer spending was offset by strong factory output and external demand allowing the Bank of Japan to increase its growth expectations over the next 2 years and keep its policy rate and JGB target yield unchanged.
In February the pound weakened 1.1% against the dollar, 1.7% against the yen, 2.3% against the Australian dollar, 2.2% against the Brazilian real and 4.0% against the South African rand. It did, however, rise 0.6% against the euro.
US Equities was the strongest performing asset class in February, followed closely by Global Property (the majority of which is denoted in US dollars). EM and developed Asian equities were also particularly strong.
Bonds, particularly riskier bonds, performed well but couldn’t keep up with exuberant equity markets.
The FTSE 250 slightly outperformed the FTSE 100 over the month, up 3.5% to the FTSE 100’s 3.1% (the below table shows the performance of the FTSE All Share).
Performance was strong over the month across all portfolios.
Core Active slightly outperformed Absolute Oriented due to strong investment grade bond returns vs mixed absolute return performance over the month.
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