This note is written as a general recap of macro market moves, rather than a detailed summary accompanied by our thoughts on asset allocation. Those are covered off elsewhere.

A weak month for most asset classes, with stocks and bonds doing roughly equally bad. This follows a January in which stocks were up some +6%, as inflation data was proving fairly well behaved.

The personal consumption expenditure (PCE) inflation data, however, showed that perhaps inflation is remaining more stubbornly close to 4-5%, rather than 3-4%, which proved toxic to risky assets and sentiment, consequently much of January’s gains were given back.

Metals and mining was particularly weak, and by investment style both Quality and Value underperformed, with Growth stocks performing quite a bit better (noting that growth stocks have been in an otherwise fairly material drawdown for over a year).

Locally, materials, which is where most of the metals and mining stocks are, underperformed, followed by financials. Many of the majors went “ex dividend”, but we also had pullbacks in lithium carbonate pricing (China spot has fallen quite meaningfully over the past month) and iron ore was subject to anti-pollution efforts regarding steelmaking in China.

This is in addition to the pressure from higher rates, higher USD, which typically weighs on commodities.

Macro market movements are consistent with the pattern of material tightening, from November 2021 to October 2022, at which point financial conditions begun to loosen, in the belief that the synchronised global tightening cycle led by the US Federal Reserve might be coming to an end, with the terminal rate firmly in sight.

Those more favourable financial conditions remained up until February 2023, at which point concerns about progress, or lack therefor, on core inflation begun to resurface, exacerbated by the PCE print referred to at the start of the note.

More hikes to come.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

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