February’s investment market commentary

The main story for markets in February was the extraordinary sell off in sovereign bonds. This move was primarily as a result of two main factors, which Andrew Yeadon’s update explains.
Published 5 March
3 mins

The main story for markets in February was the extraordinary sell off in sovereign bonds. This move was primarily as a result of two main factors: (1) the likelihood that the US government will soon enact a massive US$1.9tn fiscal stimulus program, and (2) hopes that COVID-19 economic constraints will lessen as we move further into 2021.

With the Democrats controlling all three legs of the US government, it seems probable that the last hurdles for the US fiscal splurge will soon be cleared. If so, it will significantly reinforce the US recovery. Investors have also taken encouragement from the falling COVID-19 infection rates and accelerating vaccine roll-outs, with early reports suggesting the various jabs are very effective at reducing infection and transmission rates.

While many individuals and businesses have suffered financial loss through the lockdowns, others have done much better, which is reflected in astonishingly high savings rates over recent quarters. As lockdowns ease, it seems reasonable to expect pent up demand to turbo-charge the economic recovery in H2. Investors have therefore started to focus on the likelihood of increased inflation, a scenario central banks are likely to be tolerant towards as they look to boost employment and economic activity. The expectation of higher growth and inflation put upward pressure on longer-dated government bond yields during the month.

Equity markets rose (+0.6%) as measured by the MSCI AC World Index in US Dollars. The best performing regions were those with a greater exposure to cyclical sectors, such as the UK (+1.8%). US equities (+0.8%) were supported by the expectation of further fiscal support, while Emerging Markets (-1.0%) lagged after a strong January. The more economically sensitive sectors such as Energy (+11.5%) and Financials (+7.0%) outperformed in February, although “stay at home” Communication Services (+3.4%) also did well on the back of good earnings results. The weakest sectors were generally the more defensive areas such as: Utilities (-6.7%), Healthcare (-4.4%), and Consumer Staples (-4.3%).  In terms of style, Value (+2.7%) significantly outperformed Growth (-1.5%), while more cyclical Smaller Companies (+3.3%) outperformed Larger Companies (+0.6%).

Within fixed income, the sharp rise in government bond yields, in anticipation of stronger economic growth, meant that lower quality sub investment grade corporate bonds, as measured by the ICE Merrill Lynch Global High Yield Index (+0.4%), outperformed investment grade credit and safe haven government bonds, with the Merrill Lynch Global Corporate Investment Grade Index down -1.6% and the JP Morgan Global Bond Index down -2.2% (all hedged to US Dollars).

Commodities jumped higher with the Bloomberg Commodities Index up +4.6%. Crude Oil (+16.1%) and Industrial Metals (+8.2%) outperformed, supported by the prospect of a strong recovery in demand in H2. While Gold (-8.2%) was the weakest sector, hindered by rising bond yields which increases the opportunity cost of investing in the precious metal.

In terms of currencies, the pound was strong, supported by the UK’s efficient vaccine roll-out, appreciating against the US Dollar (+1.6%), Euro (+2.2%), and Japanese Yen (+3.4%). The pound also strengthened against emerging market currencies, such as the Brazilian Real (+4.1%), Mexican Peso (+3.2%), and the South African Rand (+1.3%).

(Notes: All monthly data is quoted in Sterling terms unless otherwise stated).

FTSE 1006407.466483.43
DJ Ind. Average29982.6230932.37
S&P Comp3714.243811.15
Nasdaq 10012925.3812909.44
£ Base Rate0.100.10
Brent Crude55.0464.42

This month’s values quoted as at 26/02/2021. The above values are sourced from Bloomberg and are quoted in the relevant currency.

Clients of Nedbank Private Wealth can get in touch with their private bankers directly to understand how their portfolios are responding to market events or call +44 (0)1624 645000 and speak to our client services team.


If you would like to find out more about how we help manage clients’ investments, please also contact us on the number above. Or you can get in touch using the links to the forms towards the end of this page.

Investments can go down, as well as up, to the extent that you might get back less than the total you originally invested. Exchange rates also impact the value of your investments. Past performance is no guide to future returns. Any individual investment or security mentioned here may not be suitable, and is included for information only and is not a recommendation. You should always seek professional advice before making any investment decisions.

about the author

Please note that Andrew Yeadon retired in March 2021. He was replaced by Tom Caddick, whose details are below for reference.

Tom Caddick

Tom Caddick

Tom joined Nedbank Private Wealth as its chief investment officer in March 2021. Prior to joining, Tom was at Santander Asset Management in London for nine years, where he was, most recently, chief investment officer for the UK business and previously global head of the multi asset division. He has over 20 years’ investment experience, including several years as head of multi manager and fund selection at LV Asset Management.


Tom’s responsibilities include heading the London-based investment team, and chairing both the International Strategy Committee and the International Investment Committee. Tom is also part of the international investment team for Nedgroup Investments, a sister company of Nedbank Private Wealth.

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