The Federal Reserve inspired recovery in equity markets following the Q4 2018 sell-off, continued through February, albeit on a more mixed and less dramatic basis than January. European equities led the way with a return of 4.1% in euro terms, taking its recovery since the December low to 14%.

The US and Japanese markets broadly kept pace with Europe in February. US equities returned 3.1%, taking its recovery since the December low to 19% and leaving it only 4% off its all-time high. The major laggard was the UK, which returned 2.3% in February and 8% from its December low, held back by Brexit uncertainty and sterling strength, an important factor for UK stocks given that some 75% of listed company revenues are derived offshore. The MSCI World index returned 3% on the month and is up 17% from its December low.

What a difference a month makes. Following the despair of December, markets made one of their best ever starts to a new year, with virtually all asset classes and markets rising, some very sharply. Many equity markets managed to recover the ground lost in December.

The US led the way with a return of 8%, pulling the MSCI World index up by 7.8%. In this risk-on environment, emerging markets outperformed developed markets, up 8.8%, with Latin America again relatively strong, up 15%. While all markets were buoyant, the UK was the notable underperformer, up 3.7%. UK equities were held back by a strong pound which rallied 2.5% on a trade-weighted basis as fears of a no deal Brexit faded. All sectors of the markets rose, with
technology stocks leading the way after their particularly sharp falls in Q4 last year. The tech-heavy NASDAQ index was up 10% and the NY FANGs 13%, the latter having risen by 22% from the December 24th lows compared with a 15% rise in the S&P 500.