Written by Cormac Nevin
Markets continued their strong run for the month last week, with the MSCI All Country World Index returning +1.4% in local currency terms and up +0.7% in GBP terms; capping a healthy return of +4.7% for the month of February to date in GBP terms. Fixed Income markets were also positive, with global government bonds, corporate credit and high yield bonds generating modestly positive gains across the board.
US Equity markets were once again among the strongest globally last week, with the S&P 500 Index of large cap US stocks returning +1.7% for the week in US Dollar terms and 0.9% in GBP terms, capping a +7.5% return for the year to date in GBP terms. This performance was again led by the largest companies in the index, who are once more dominating the weight in, and returns of, the index. The S&P 500 is now sitting at an all-time high, thanks largely to the contribution of Nvidia and other large-cap technology names. Nvidia, the graphics processor company, whose products are used for building large language models (LLM or commonly referred to as “artificial intelligence” models), announced a +265% jump in quarterly revenues (year-over-year), thanks to surging spending on datacentres for AI LLMs. The resulting surge in the share price propelled Nvidia ahead of Amazon and Alphabet to become the third most valuable listed company in the US, behind Microsoft and Apple. Whether the profits from the AI goldrush currently taking place in Silicon Valley and beyond are made by the companies most closely involved in AI, or those selling them the “picks and shovels” remains to be seen.
Another source of equity market returns last week, and for the month of February to date, has been in the Far East. After a very challenging January, Chinese equity markets appeared to stabilise in advance of the commencement of the Year of the Dragon on the 10th of February and subsequently roared back with a +10.3% gain in GBP terms for the month to the end of last week. Similarly strong gains in the Korean and Taiwanese markets have led the wider Emerging Market index to be the strongest performer for the month of February so far, making it a nice complement to the performance we have seen from the US; particularly as emerging market stocks tend to trade on dramatically lower valuations and potentially have more room to run from this point.
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