February Monthly Market Review
- Anthony Walters
- Mar 3
- 4 min read
Updated: Apr 16
Welcome to this month’s Monthly Market Review, where we break down the key economic and market developments shaping investor sentiment. In this latest market recap, we explore how inflation trends, central bank decisions, and geopolitical events influenced global performance. Whether you’re tracking the latest investment trends or looking for a monthly financial summary, this update provides insights into what’s driving markets—and what may lie ahead.
We’ve seen this before…
Equity market volatility matches what we’ve seen over the last 74 years
UK and Europe cuts rates
Inflation rises, giving pause for thought in the US
The Balanced portfolio returned -0.37% in February as markets trended sideways, thanks to growing uncertainty around the potential for US tariffs and geopolitical instability in Europe and the Middle East.
Inflation and Interest Rates.
UK.
In January 2025, the UK's Consumer Prices Index (CPI) saw an unexpected rise of 3.00% year-on-year, up from 2.50% in December 2024. The Office for National Statistics highlighted that the main contributors to this increase were transport, food and non-alcoholic beverages, while housing and household services had the largest downward impact.
The Bank of England (BoE) cut interest rates by 0.25% to 4.50% in February 2025. The BoE's Monetary Policy Committee (MPC) explained that this move was aimed at balancing the slowing economic growth with ongoing inflation concerns. They noted significant progress in reducing inflation over the past two years, thanks to the easing of previous external shocks and the restrictive monetary policy that helped stabilise long-term inflation expectations.
U.S. Federal Reserve.
In January 2025, the United States saw its Consumer Price Index (CPI) rise by 3.00% year-on-year, slightly up from 2.90% in December 2024. This increase was mainly driven by higher prices for essential items like groceries and energy. J.P. Morgan noted that the January 2025 CPI report was something of a surprise, with the headline figure rising by 0.50% month-over-month (MoM) after a 0.40% rise in December 2024. This persistent level of inflation led market participants to question the pace of interest rate cuts for the year ahead, a concern later addressed by the Federal Reserve Chair.
During its first meeting of 2025, the Federal Reserve decided to keep the federal funds rate within the 4.25%-4.50% range. Fed Chair Jerome Powell explained that, with the policy stance now significantly less restrictive and the economy remaining strong, there was no need to rush any adjustments. The Fed's goal remains to bring inflation down to its 2.00% target, with potential rate cuts expected later in the year.
European Central Bank (ECB).
Despite Eurozone inflation rising to 2.50% in January, up from 2.40% previously, the European Central Bank (ECB) lowered its key interest rates by 0.25% as expected. This move brought the deposit facility rate down to 2.50%, aligning with the ECB’s updated inflation outlook, indicating that price pressures are easing as expected.
ECB President Christine Lagarde reassured the market, saying "the disinflation process is well on track. Inflation has continued to develop broadly in line with our staff projections and is set to return to our two percent medium-term target over the course of this year."
Market performance.
In developed markets, Singapore gained over 9.00%, powered by financial holdings like DBS Group (+3.93%) and communications company SEA Representing Ltd (which gained over 5.00%).
Portugal propped up the laggards, falling by almost 5.00% as the highly concentrated index felt the effects of a falling energy sector in February.
China led emerging markets with a gain of over 10.00% as optimism abounded regarding the development of Chinese AI provider, DeepSeek, and continued fiscal and regulatory support to improve the business environment in China.
Indonesia propped up the laggards, falling by almost 17.00%, driven by the decline in Bank Central Asia which fell by over 7.00% as it wrestled with allegations of a cyberattack, breaching customer data. The Bank itself comprises 23.00% of the index and is a key driver of index performance.
Sector performance.
As expected, the China/Greater China sector led for the month, reflecting the positive fundamental story as mentioned above.
The India/Indian Subcontinent fared worse, falling by 10.00%. Leading constituents of the sector, such as technology company Infosys, endured a tough month, falling by 9.13% amid a global market selloff.
Summary.
Inflation has plateaued, and often the last move is the hardest in reaching the 2.00% inflation target, set by central banks. Importantly, ECB President Christine Lagarde has stated that disinflation is “on track”, providing steady reassurance to the market.
Despite “sticky” inflation, interest rate cuts have continued in the UK and EU, although the US remains more cautious, preferring to wait for more economic data to guide its view.
Whilst Emerging Markets remain volatile, China is leading the pack on a year-to-date basis, with the continued promise of fiscal stimulus and regulatory support providing a backdrop against challenging economic data.
Although equity markets have seen volatility in March, multi-asset portfolios have provided some insulation from these moves, owing to the smaller downside movement of the Global Bonds (-0.40%) and UK Gilts (-0.65%) sectors.
Market Volatility.
One important consideration, during periods of equity market volatility, is whether history can guide us. When thinking of US equities, it's normal for the market to experience some volatility and sideways movement in the early months of a post-election year, as government policies begin to take shape. Looking at 74 years of data (in the chart below), the S&P 500 typically moves sideways for the first five months of the year, which aligns with the recent volatility we've observed. After this, the market tends to make progress for the rest of the year.
History may not repeat precisely, but it does rhyme…
Sources.
Anthony Walters - Head of ESG at Clever Adviser Technology Ltd (Clever)
The ‘Balanced portfolio benchmark’ is the UT Mixed Investment 20-60% Shares Sector.
Consumer price inflation, UK: January 2025, by ons.gov.uk, 19th February 2025
Bank Rate reduced to 4.5% - February 2025, by bankofengland.co.uk, 6th February 2025
January inflation rate higher than expected: What this means for the markets, by JP Morgan, 13th February 2025
Here’s The Fed’s Remaining 2025 Meeting Schedule And The Outlook For Interest Rates, by Simon Moore, Forbes
Annual inflation up to 2.5% in the euro area, by Eurostat, 24th February, 2025
MONETARY POLICY STATEMENT, PRESS CONFERENCE, Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 30 January 2025
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