Globally equity markets performed strongly in February. In the US, the S&P 500 was up +5.2%, the Nasdaq increased +6.1%, whilst in the UK, the FTSE 100 was flat. The driver of the US markets was continued strong performance of the technology sector, as well as a decline in inflation (+3.1% rolling 12 months), which bodes well for future monetary policy. The ASX All Ordinaries rose +1.2%, with technology and consumer discretionary sectors being the top performers. Gold was the worst performer, impacted by rising bond yields and a poor reporting season, where cost increases were a factor. Rising costs against a backdrop of weaker commodity prices were a headwind for the resources sector, though we would note investor sentiment is already quite bearish.

Regarding the ASX reporting season, we viewed it as better than had been expected. Of note, a reasonably large number of small/mid caps stocks beat analyst expectations, both on profit margins and revenue growth. The overall theme was that despite the large number of interest rate hikes in the last 18 months, the Australian economy and consumer spending has been resilient. Whilst unemployment has risen in recent months (currently 4.1%), it is still very low by historical standards. In terms of monetary policy in Australia, the RBA remains "on pause" whilst it monitors inflation data. We do not assume any interest rate cuts for the next 6-9 months but believe we have seen the worst of the interest rate rises. In bond markets, the US 10-year bond rate increased +26 basis points (bp) to close at 4.28%, whilst its Australian counterpart rose +12 bp to finish at 4.14%. The Australian dollar was flat, ending at US$0.65.