February rekindled many investor fears about 2022. January inflation and jobs data were higher than expected, and the Citi economic surprise index had its largest monthly gain since September 2022. At the start of 2023, a recession was the largest fear, so strong data was interpreted as a positive. However, continued strength increased the fears of a Fed rate hike, which impacted global markets.
The SPX finished February down but remained above the levels at the start of the year. Within equities, technology was the best-performing sector, and energy was the worst. Rates were up sharply for the month across the curve, and 2yr yields had their largest monthly increase since September 2022. The rise in yields drove the dollar higher and commodities lower. Despite investor fears, there were some positive signs. International stocks were strong, with the DAX and Eurostoxx both up for the month. Credit spreads and equity vol barely moved, and factor moves were muted. Despite mixed moves in the market, January’s signs of HF re-leveraging persisted, with the GS VIP hedge fund index outperforming the SPX for the second month in a row.
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