Wealth Partners Alliance | Market Recap, February 2024

Equities: Equity markets were positive around the globe in February. Broadly, growth outperformed value in most regions. Market capitalization was mixed with small cap outperforming large cap within the U.S., while large cap outperformed small in international markets.

Positive economic data helped fuel the “risk-on” sentiment in February and the S&P 500 closed the month at a record high. Concentration persists at the top of the index and NVIDIA (+28.6%) was a large contributor to performance following a favorable earnings report. REITs and utilities, which have historically been more sensitive to interest rates, lagged.

(+) U.S. markets were positive in February. Small cap modestly outpaced large cap due to a surge in the biotech industry.

(+) International developed markets, while positive, trailed the U.S. and emerging regions. Underlying country results were mixed with mainland Europe outperforming the United Kingdom.

(+) A sharp rebound in China (+8.4%) buoyed Emerging Markets. Government policy action to help stabilize the property market and a focus on deleveraging helped boost investor confidence.

Fixed Income: Interest rates rose across the U.S. yield curve during February. Federal Reserve language indicating a willingness to keep rates higher for longer than the market originally expected was one of the factors driving the move.

Index Performance Attribution - Corporate spread areas outperformed similar duration Treasuries in the period. A resilient economic backdrop and strong consumer has provided support for non-government sectors. Currency return had a negative impact on non-U.S. debt in February.

Credit Market Spreads – Trailing 5 Years; Corporate fundamentals, both in investment grade and high yield, continue to remain positive. This, combined with positive sentiment around a “soft” – or even “no” – landing scenario, and a favorable demand environment given the all-in yield levels has pushed spreads tighter. Both sectors sit well below their 10-year averages and, in our view, are “priced nearly for perfection”.

(-) Fixed income volatility continued in February as markets repriced expectations for the timing of Fed rate cuts in 2024, going from five expected cuts to three. Interest rates moved higher as a result and the Bloomberg Agg declined during the month.

(+) High yield corporate bonds edged out a modest positive return on the back of tightening credit spreads.

(-) Rising interest rates outside of the U.S. were a headwind for non-U.S. debt, as was a stronger U.S. U.S. dollar.

Real Asset/Alternatives: Commodity markets fell during February, with all subcomponents in negative territory. Energy saw essentially flat oil prices, while natural gas prices fell over 15% during the month. Agriculture was particularly impacted by negative pressure in the wheat and soybean markets.

REITs posted a gain in February. Sub-sector results were mixed. Lodging/resorts has benefited from an uptick in travel so far in 2024 compared to this time 2023. The more rate sensitive areas of Diversified REITs were a headwind for the sub-sector during the month.

(+) REITs were positive during the month. Despite the rising rate environment, the segment benefited from its equity beta.

(-) Commodity markets were broadly negative in February, with weakness across various underlying sub-components.

(-) Real Assets were negatively impacted by falling commodity prices, rising interest rates and mixed property performance.

David A. McBee, Jr. AIF? John Saalfield Brittany Smith, AIF? Rick Lima Rodd Newhouse, EJD, AWMA?, SE-AWMA? Garry Scheufler John Garcia Mike Peschel Brandon L. Glasscock Mandy Haskell, CFP?, CDFA? Tyler Beeson, CFP, CIMA, CPWA, MBA David Silva Wealth Partners Alliance Concurrent

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