Monthly Market Commentary from Quilter Cheviot
By Duncan Gwyther, Chief Investment Officer
The narrative surrounding financial markets shifted in February. A series of stronger than forecast economic data releases raised concerns that central banks may raise interest rates higher than previously expected. This caused equity markets to hand back some gains following a stellar start to 2023 whilst bond markets erased January’s rally entirely, ending February around the same levels as at the start of the new year.
February began with three key central bank decisions in the first two days, as the Federal Reserve (Fed), Bank of England (BoE) and European Central Bank (ECB) all raised interest rates further. The Fed’s 25 basis point increase took the Fed funds rate to 4.5%, the BoE’s base rate stands at 4.0% after a second successive 50 basis point increase while the ECB is still playing catch-up, with another 50 basis point rise taking the main refinancing rate to 3.0%. All these moves were broadly in keeping with market expectations and supported the hitherto prevailing belief among market participants that monetary policy was approaching the endgame for this tightening cycle…