February proved to be a positive month with the SPX increasing by over 5.3%. This return was again driven by the mega caps with the SPX outperforming small caps by 200 bps. The SP top 50 beat the SPX by 100 bps. The factor that drove returns was momentum based with the SP momentum index increasing by 11% in a month while low volatility increased only 166 bps for the month.
The best two sectors were consumer discretionary and industrials while the poor performers were consumer stables and utilities.
The international investor has still not been rewarded with the SP ex-us index gaining only 1.65% and emerging markets also underperforming the US equity markets. Bonds underperformed with a negative return, -1.34%.
Bonds are not attractive given the switch in sentiment about the Fed lowering rates in the near-term; nevertheless, equities still move higher based on lower recession risk and stabilizing inflation. These two themes will continue during the last month of the quarter.
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