Global Market Landscape: "All That Glitters Isn’t Gold"

As the old British saying goes, "Keep calm and carry on." This mantra feels especially relevant for investors navigating today’s turbulent economic waters. In February 2025, global markets were confronted with a flurry of headlines: potential tariff increases from the Trump administration, persistent inflation that refused to budge, and central banks carefully balancing the need for growth with the necessity of price stability.

In the words of Shakespeare, "All that glitters is not gold" - A fitting caution for investors eyeing traditional inflation hedges in today’s volatile climate.

Last month brought a stark reality check: The MSCI World Index slipped -0.69% by 28 February, reflecting tariff jitters and persistent U.S. inflation concerns. Meanwhile, the MSCI Emerging Markets Index edged up 0.50%, buoyed by China’s tech surge. With consumer confidence in the U.S. waning and Trump’s trade policies looming, this commentary navigates the shifting tides of developed and emerging markets.

We unpack developed and emerging market dynamics, guiding you through a landscape where inflation hedges and growth concerns collide.

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February 2025 Market Commentary

Developed Markets Performance

Executive Summary 

Developed markets demonstrated grit in February 2025, with the MSCI World Index dropping -0.69%. The U.S. saw the S&P 500 retreat from highs, dropping -1.34% by the end of the month as tariff talks stoked growth worries over inflation. The UK’s FTSE 100 held steady, buoyed by the BoE’s rate cut to 4.50%, though inflation forecasts crept to 2.70% for Q2. Across the Atlantic, the U.S. service sector PMI slipped into contraction at 49.8—the first in two years—signaling cracks in consumer sentiment.

Developed markets faced headwinds in February 2025, with the MSCI World Index declining by -0.69% amid economic uncertainty. In the U.S., the S&P 500 fell -1.42%, reversing early gains as tariff concerns and consumer sentiment weighed on markets. Meanwhile, the Bank of England implemented a 0.25 percentage point rate cut, bringing interest rates down to 4.50%, but CPI inflation forecasts still rose to 3.70% for Q3. Across the Atlantic, early signs of economic slowdown emerged as the U.S. service sector PMI fell to 49.8, marking contraction for the first time in two years.

Market Summary 

The Fed’s cautious stance, driven by January’s sticky PCE data and tariff-related “upside risks” to inflation, has markets pricing just two 25bps cuts by year-end. The BoE’s rate cut in the UK faces headwinds from tariff-spiked construction costs. In Europe, Germany’s DAX index recorded a 10.50% gain on a one-month rolling basis as of mid-February, highlighting strong investor sentiment driven by improving manufacturing data and earnings optimism. Investors should brace for volatility but watch secular trends like AI for recovery signals.

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Emerging Markets Performance

Executive Summary 

Emerging markets (EM) showed resilience, with the MSCI EM Index rising 0.50% in February 2025, led by China’s tech rally and India’s 6.40% GDP outlook.

The Hang Seng Tech Index surged over 30.00% in the past month, reaching a three-year high. Tariff fears hit Mexico and Brazil hard, with currencies sliding 3.00-5.00% against the pound, while oil exporters like Colombia rode a -1.03% Brent crude downturn at $72.81 as of the 28th of February 2025.

 Market Summary  

EM equities danced to a volatile tune. China’s tech surge offset deflationary pressures, with DeepSeek slashing AI training times and eyeing global demand, yet U.S. tariffs threaten exports. The company sent shockwaves through equity markets in late January, wiping out nearly a trillion dollars in US technology value and causing Nvidia to lose close to $600bn in market cap, the largest single-day loss in history. India’s stock market experienced significant volatility in February 2025, following a sharp correction earlier in the month. The BSE Sensex and Nifty indices faced a steep decline, with the Sensex dropping over 1,400 points on February 28 due to multiple factors, including heightened selling pressure from Foreign Institutional Investors (FIIs) and negative global cues stemming from U.S. tariff announcements targeting Canada, Mexico, and China. Latin America faltered as Trump’s tariff rhetoric targeted Canada and Mexico, while Brazil’s fiscal woes remain problematic, with a high gross public debt (96.00% of GDP) and budget rigidity (92.00% of spending is mandatory). Efforts to cut spending have been insufficient, leading to market concerns and exchange rate volatility. Opportunities glimmer in AI-driven tech and commodity plays, but trade uncertainty casts a long shadow.

Forward Outlook: Portfolio Considerations

With inflation’s persistent grip and Trump’s trade policies reshaping market dynamics, investors may need to rethink portfolio hedges. Gold has delivered an impressive 11.90% year-to-date gain, but real assets like infrastructure, real estate, and farmland offer both income and resilience. Infrastructure, in particular, benefits from inelastic demand and built-in inflation escalators, especially in energy, where power grid upgrades for AI data centers are driving long-term growth.

Persistent inflation, driven by January's hotter-than-expected CPI and rising housing costs, continues to challenge the Fed's 2.00% target, while tariff threats highlighted by the National Association of Home Builders' concerns over material price hikes, add economic strain. Gold's lack of income leaves portfolios exposed to volatility, but real estate can counter this with rent growth potential amid supply constraints, and farmland offers diversification through commodities like foodstuffs, whose revenues rise with inflation.

China’s AI sector remains a compelling tactical play, with innovations like DeepSeek potentially narrowing valuation gaps between Chinese and U.S. tech firms. Meanwhile, developed market high-yield bonds continue to attract investors, offering strong growth potential while helping cushion against default risks.

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Disclaimer:

The commentary you find on this page is for information only; it is not intended as research or a recommendation suitable to your circumstance. Please seek financial advice from a professional before acting on investment decisions.

As is the very nature of investing, there are inherent risks, and the value of your investments will both rise and fall over time. Please do not assume that past performance will repeat itself and you must be comfortable in the knowledge that you may receive less than you originally invested.