Investment Update – February 2024

Global equities returned 4% in February, with gains being led by the US tech sector. The so-called Mag-7 jumped by nearly 10% over the month, fuelled by AI optimism and Nvidia’s blistering run, with its market value hitting $2tn for the first time. The chipmaker has been responsible for over a quarter of the year-to-date gains in the S&P 500, prompting concerns about market concentration in a small number of technology names.

Bond yields nudged higher as investors digested a strong January US jobs report, and other economic data that confirmed growth remains resilient in the world’s largest economy. Elsewhere, there was some evidence that the UK has turned a corner as survey data suggested the economy was growing at an above-trend pace.

Gold was little changed over the month, but oil prices rose 3%. Industrial and agricultural commodity prices both fell, at odds with improving investor sentiment towards other asset classes.

A US recession remains elusive, and with central banks having scope to cut interest rates aggressively if needed, any short-term weakness may not be enough to derail equity markets. Unemployment remains near record lows across the developed world, and there are tentative signs that growth may have bottomed out in Europe. We would need a sudden and dramatic deterioration in economic activity, or a resurgence in inflation, to upset the soft-landing narrative.

Nonetheless, markets are still expecting the Fed to cut interest rates in June and they could be quickly followed by the Bank of England, with UK inflation expected to fall to 2% in April. A mild winter in Europe and an abundance of supply has sent the price of natural gas tumbling, with the energy price cap due to fall by 12.3% in spring.

We expect global economic activity to remain subdued in the coming months, and 2024 in general, which should allow central banks to embark on a measured easing cycle beginning in the summer. As the year progresses we may also see some slack appear in labour markets, a goal which has eluded central bankers so far.

Important information

This document is issued by Skerritts, which is a trading style of Skerritt Consultants Limited. Skerritts makes no warranties or representations regarding the accuracy or completeness of the information contained herein.  We have prepared the following document based on our view of the current market. Nothing in this document shall be deemed to constitute financial or investment advice in any way. We recommend you speak to your adviser before making any decisions.  This document shall not constitute an invitation or inducement to any person to engage in investment activity. Past performance is not a guide to future returns and the value of capital invested and any income generated from may fluctuate in value.  Skerritts is a trading name of Skerritt Consultants Limited who are authorised and regulated by the Financial Conduct Authority. FCA Number 163291. Skerritt Consultants Limited is registered in England and Wales, registered number 04129116. Registered Office: Skerritt House, 23 Coleridge Street, Hove, BN3 5AB. VAT Registration: GB 161 0039 56

Written by:
Charlie Lloyd
Head of Investment, Skerritts

If you want to know more about investing with Skerritts or have any questions at all to our team, don’t hesitate to get in touch.

We are always happy to help.