The factors which led to strong market returns during January continued into February, such that the negative returns from the latter part of 2018 seem to be an age ago. It would however be unwise to forget that markets can turn quickly. Clearly the strong support provided by central banks for equity markets has been a key part of the confidence for market participants; but at some point the ‘free market’ is going to have to feel confident aside from such accommodative monetary policy settings. Having said that, the conciliatory tone between Washington and Beijing is calming concerns of further fallout, and knowing that central banks are going to continue with the recent policy approach allays any immediate fears of the prospect of rates rising at a time when the global economy looks a little more fragile in terms of growth.
During February, equity markets around the world were generally positive to various degrees, and if you happened to avoid looking at monthly data the medium term picture looks quite benign – the NZX50 is up 3.8% for the month, 5.8% for the quarter and 12.6% for the year. At a global level, the MSCI ACWI (unhedged) is up 4.5% for the month, 3.8% for the quarter and 5.1% for the year. However, this masks the effect of currency where over the year it’s been very positive for those who have kept their foreign currency exposures unhedged. These unhedged returns are around 2% higher for the month and nearly 5% higher over the year as a result of NZ dollar weakness, which show the underlying equity markets offshore haven’t produced much in the way of returns over the year notwithstanding the recent rally.