- Modest economic growth expectations continue to be surpassed in the S., leading to a broadening ‘soft-landing’ consensus. On the contrary, more optimistic expectations leave markets more susceptible to disappointment.
- The anticipated timing of the Fed’s first rate cut keeps While market participants entered the year expecting six cuts, three or fewer cuts now appear more likely as the Fed has emphasized its decisions will be data dependent.
- Inflation prints will continue to make headlines but the data has been trending lower with the Fed’s favored inflation indicator, PCE, getting closer to the 2% target. CPI is also falling but is running slightly hotter due to a larger constituent weight in housing.
- Supportive economic data and better than expected earnings from S. companies powered another strong month for risk assets. Roughly three-quarters of U.S. companies exceeded Q4 earnings expectations with ~90% reported.
- Newly found complacency with a soft-landing scenario has contributed to expanding investor risk appetite evidenced by a variety of factors stemming from historically tight credit spreads to the recent surge in crypto assets.
- February was supportive for international stocks, although they continue to lag U.S. counterparts. Chinese equities rose more than 8% supporting emerging market Japan has been a standout performer within developed, ex. U.S. indices.
- Rates rose in the belly of the curve over the month, reflecting stronger economic data and growth With the rise in rates, duration-sensitive assets generally suffered.
- Alternative assets continue to gain in popularity within diversified Within the private equity sector, exit activity is set to increase as M&A and IPO conditions loosen and funds look to return capital to investors.
- As investor optimism continues to impact markets and raise valuations, it’s a time to remain disciplined and express a modest preference toward quality and liquidity across asset classes and within portfolios.
