Major global equity market indexes moved higher in February 2024. Emerging markets modestly outperformed their developed-market counterparts. Investors’ optimism regarding generally positive corporate earnings offset concerns that stickier-than-expected inflation data may prompt the Fed and other central banks to delay a pivot to interest-rate cuts. North America led the major developed markets in February due to strength in the U.S. The Dow Jones Industrial Average and the broad-market S&P 500 Index closed at historically high levels on several trading days in February, while the tech-heavy Nasdaq Composite Index reached a record-high close on the last day of the month. The Pacific region was the primary developed-market laggard in February, as Australia recorded a negative return for the month. The Far East was the top-performing region within emerging markets for the month, led by strength in China. Conversely, Latin America was the most notable underperformer due to relative weakness in Brazil.¹ 

Global fixed-income assets, as represented by the Bloomberg Global Aggregate Bond Index, declined 1.3% in February. High-yield bonds registered modest gains for the month and led the U.S. fixed-income market, while corporate bonds and U.S. Treasury securities recorded losses.² Treasury yields rose across the curve—with the exception of the one-month Treasury bill—in February. Yields on 2-, 3-, 5- and 10-year Treasury notes increased 0.37%, 0.35%, 0.38% and 0.26%, respectively, over the month. The spread between 10- and 2-year notes widened from -0.28% to –0.39% in February, and the yield curve remained inverted.³ 

Global commodity prices, as measured by the Bloomberg Commodity Total Return Index, fell 1.5% in February. The West Texas Intermediate (WTI) and Brent crude prices rallied during the month as ongoing geopolitical tensions in the Middle East spurred investors’ worries about a disruption in oil exports. The WTI and Brent crude oil prices ended February with gains of 3.2% and 1.7%, respectively. The New York Mercantile Exchange (NYMEX) natural gas price plunged 11.4% over the month amid slowing demand due to above-average winter temperatures in the U.S. The 0.6% decline in the gold spot price was attributable to stronger-than-expected U.S. economic data and the rise in U.S. Treasury yields during the month. (The gold price typically moves inversely to bond yields.) Wheat prices were down 3.2% in February due to relatively weaker demand for exports from the U.S.⁴ 

Minutes from the Fed’s 30-31 January meeting, released on 21 February, revealed that most Federal Open Market Committee (FOMC) members expressed concerns about reducing rates too soon at the risk of reigniting inflation. “Most participants noted the risks of moving too quickly to ease the stance of policy and emphasised the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent.” On a more dovish note, a couple of meeting participants “pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long…In discussing risk-management considerations that could bear on the policy outlook, [meeting] participants remarked that while the risks to achieving the Committee’s employment and inflation goals were moving into better balance, they remained highly attentive to inflation risks."

On the geopolitical front, the Russia-Ukraine and Israel-Hamas military conflicts continued in February. Russia’s invasion of Ukraine marked its second anniversary on 24 February, with little hope for a resolution in the near term. Republican Party leaders in the U.S. House of Representatives rejected a bipartisan bill approved in the Senate that would provide military aid for Ukraine, Israel, and Taiwan, as well as immigration reforms. At the end of the month, negotiations on a ceasefire in the Israel-Hamas war appeared to be in jeopardy following a clash between Israeli soldiers and Palestinian civilians in Gaza as many residents were caught in a chaotic rush to obtain supplies from 30 trucks delivering aid to the territory.

The U.S.- and U.K.-led coalition (with support from Australia, Bahrain, Canada, Denmark, and the Netherlands) continued to engage in a military conflict with the Houthi movement, an Iran-backed militant group that seized Sanaa, Yemen’s capital, in 2014. In late February, the coalition struck 18 Houthi targets in Yemen, including underground weapons storage facilities, missile storage facilities, air defense systems, radars, and a helicopter. In a news release, the U.S. Central Command noted that the military strikes sought to “degrade Houthi capability and disrupt their continued reckless and unlawful attacks on international commercial and U.S. and U.K. vessels in the Red Sea, Bab AI-Mandeb Strait, and the Gulf of Aden.” The Houthis have attacked U.S. military bases in Iraq and Syria, as well as numerous commercial ships in the Red Sea. This has forced international shipping companies to reroute their vessels around the Cape of Good Hope in South Africa, putting upward pressure on freight costs.

¹ All equity market performance statements are based on the MSCI ACWI Index. 

² According to the Bloomberg US High Yield Index, the Bloomberg US Corporate Investment Grade Index, and the Bloomberg US Treasury Index. 

³ According to the U.S. Department of the Treasury. 1 March 2024. 

⁴ According to market data from The Wall Street Journal.

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