Equities were broadly weaker in February. In the US, the S&P 500 fell -2.6%, the Nasdaq was down -1.1%, whilst in the UK, the FTSE 100 outperformed, rising +1.4%. In Australia, the ASX All Ordinaries Accumulation Index fell -2.5%. Defensive sectors such as Utilities and Insurance outperformed whilst Mining was the worst performer due to concerns around the state of the Chinese economy and strength in the US dollar, which typically is a headwind for commodity prices. Growth stocks outperformed value stocks in the month.

In bond markets, the US 10 year bond yield increased +43 basis points to close at 3.95%, whilst its Australian counterpart rose +30bp to finish at 3.86%. The driver of higher bond rates was continued data showing inflation around the world remains stubbornly high, which in turn is leading to expectations that central banks will have to continue to further increase interest rates in order to bring inflation back to acceptable levels. During the month, the RBA increased interest rates by 25bp to 3.35%. The RBA has now increased the cash rate by +325bp over the last 12 months. Whilst the timing is uncertain, we remain of the view that at some point this year, we will see the domestic economy begin to cool given the impact of the rate rises, which in turn should see the current pace of rate rises moderate. 

Commodities were generally weaker in February. Thermal coal continued to slide, falling -26%, iron ore -2%, copper -3%, gold -5%, whilst brent crude oil declined -1%. The A$/US$ fell -5% to US$0.67.