As we move into March, it is worth pausing to reflect on what proved to be a volatile and, at times, disorienting February. Markets were driven less by steady fundamental progress and more by sharp shifts in sentiment, particularly around the implications of artificial intelligence and the scale of investment it now demands. While U.S. equities absorbed much of this turbulence, other regions displayed notable resilience, supported by fiscal policy, sector composition and political developments. Against a backdrop of evolving trade policy, renewed geopolitical tension and shifting inflation expectations, asset prices responded in ways that underscore the importance of diversification and disciplined positioning. In this month’s update, our Chief Investment Officer, Jeff Brummette, reflects on the key themes and market movements from last month and how they shape our portfolio positioning as we approach the end of Q1.
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February was characterised by sharp fluctuations in the share prices of companies either directly involved in Artificial Intelligence (“AI”) or potentially impacted by it. This played out in both directions, as chip manufacturers such as Samsung and TSMC saw their share prices rise, while the major hyperscalers, notably Microsoft and Meta, saw their share prices fall. The market’s logic was straightforward, as firms like Microsoft and Meta (amongst others) are investing billions of dollars on expanding their AI capacity, raising concerns they may be overspending, whereas companies like Samsung and TSMC are the beneficiaries of that surge in capital investment.
Hyperscaler Capex Explodes Higher
Source: Bloomberg
As the month progressed, an increasing number of companies experienced wild swings (usually declines) in their share prices, as the market began to extrapolate that AI agents could ultimately replace software-as-a-service provides, real estate agents, financial services providers, consultants, and almost any white-collar profession.
Recent AI Losers and Winners
Source: Bloomberg and Oakglen Wealth
Source: Bloomberg and Oakglen Wealth
Magnificent Seven
Source: Bloomberg and Oakglen Wealth
Despite this market upheaval in U.S. markets, most other global equity markets delivered positive returns in February and remain ahead for the year to date.
Equity Markets
Index returns are in local currency terms except where noted
Source: Bloomberg
Europe continues to benefit from the surge in EU defence spending and Germany’s significant infrastructure build-out. In the UK, rising commodity prices have been a supportive tailwind, given the large exposure to global mining giants and major oil producers. Japan has also delivered notably strong performance following the decisive election victory of Prime Minister Takaichi and the Liberal Democratic Party (“LDP”), which now holds a commanding super majority in the lower house. The prime minister has pledged to pursue “a responsible and proactive fiscal policy”, committing to “wise spending” with a longer-term focus, rather than short-term deficit-driven stimulus. She has also signalled support for reducing or eliminating the consumption tax (“VAT”) on food and other essential items in an attempt to alleviate Japan’s post-pandemic affordability crisis.
Chinese markets were relatively subdued, reflecting both the Lunar New Year Holidays and the government’s recent stealthy discouragement of speculation through targeted market interventions. Fixed income markets, meanwhile, delivered broadly positive returns as a combination of easing inflation and a modest flight to quality, driven in part by stress in private credit market, pushed yields lower.
Fixed Income Markets
Source: Bloomberg
Inflation Eurozone, UK and U.S.
Source: Bloomberg Finance L.P.
Commodity prices continued to rise, fully recovering from the late January panic, while Bitcoin continues to disappoint and has now lost all of the gains it had made since President Trump was elected.
Foreign exchange rates were broadly unchanged, although the Chinese yuan posted a modest gain which seems to be a deliberate move on the part of the local authorities.
Alternative Investments Markets
Commodity returns are versus the U.S. dollar
Source: Bloomberg
Currency Rates
Exchange rate changes are versus the U.S. dollar
Source: Bloomberg
Bitcoin
Source: Bloomberg Finance L.P.
Late in the month, the U.S. Supreme Court upheld a lower-court verdict that found President Trump’s use of the IEEPA (“International Emergency Economic Powers Act”) to implement tariffs was unlawful. In response, the administration scrambled to use other legislation to justify and implement replacement tariffs, which will leave overall tariff rates broadly unchanged. However, many existing trade agreements are now at risk of conflicting with the new tariffs. Notably, the Supreme Court did not rule on whether the $175 billion in tariffs already collected under IEEPA should be refunded, though hundreds of U.S. companies have filed suits seeking reimbursement.
Compounding this uncertainty, the U.S. and Israel have launched another round of strikes against Iran, with President Trump appearing to pursue regime change in Tehran. Such an escalation could have significant ramifications for the oil supply and pricing, putting upward pressure on commodity prices and encourage yet more defence spending. War is expensive, and the associated economic dislocations may also reinforce longer-term inflationary pressures. Our portfolio positioning in energy, utilities, defence, mining and gold offers solid protection against rising energy prices, geopolitical tensions and inflation risks.
The price and value of investments and any income that might accrue may fall as well as rise and is not guaranteed. You may not get back the amount of your original investment.
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Hear more from the Oakglen experts
Our investment team continue to provide interesting and informative content to help keep you in the loop on recent global news and market trends. See below for some key highlights from around the world which our Chief Investment Officer, Jeff Brummette, has also recently covered:
Read more:
- Operation Epic Fury: Tensions Rise in the Middle East
Jeff Brummette, Chief Investment Officer
- The Tariff Reversal
Jeff Brummette, Chief Investment Officer
- Japan Update: Landslide Victory for Takaichi
Jeff Brummette, Chief Investment Officer
You can read other articles from the team on our News & Insights page.
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