stocks rose for a second consecutive month in February, with the STOXX® Global 1800 Index delivering its best two-month period since October 2010, as political and trade concerns eased.
The STOXX Global 1800 Index climbed 3% in dollar terms1 during the month. After a 7.7% advance in January, the benchmark is now up 10.9% this year, and remains 4.6% below last September’s high.
Eurozone’s economy in downward trend
Gains in European stocks came even as reports continue to show a cooling of the region’s economy.
On Feb. 7, the European Commission downgraded its forecast for the Eurozone’s gross domestic product this year to 1.3% from 1.9% predicted previously. The region’s economic growth slowed to an annual 1.2% in the last quarter of 2018, from 1.6% in the third quarter, Eurostat said Feb. 14. Germany’s economy stalled in the final three months of last year, just narrowly avoiding a recession.
On Feb. 15, Trump agreed to a spending bill from Congress just before a deadline to keep the US government open, after budget disagreements shut down state agencies between Dec. 22 and Jan. 25. The administration separately continued its engagement to reach a new trade pact with China, with both sides describing the progress in a positive light.
Speaking to the US Congress on Feb. 26, Federal Reserve Chairman Jerome Powell struck a dovish tone in saying that a global slowdown, volatile financial markets and uncertainty about US trade policy could weigh on the American expansion.2 As recently as December the Fed had forecast two more hikes in 2019.
It was China, however, where investor appetite turned the most bullish during the month. The STOXX® China A 900 Index surged 16% in dollars amid reports that the US planned to lift trade tariffs against the Asian export giant and as the nation’s authorities pursue policies to stimulate economic growth.3
Following a 27% increase since October, the STOXX China A 900 Index has technically entered a bull market — widely defined as a gain of 20% or more. The index, however, is still recovering from a 37% plunge between January and October 2018.
Construction stocks, Hong Kong on top
All 19 supersectors in the STOXX Global 1800 Index rose during February, led by industries most geared to an economic expansion. The STOXX® Global 1800 Construction & Materials Index came out on top, with a 5.3% return in dollars. The STOXX® Global 1800 Real Estate Index was the worst performer, adding only 0.1%.
The STOXX® Hong Kong Total Market Index led the advance among 25 developed markets tracked by STOXX during the month. The gauge added 6% in dollars. It was followed by the STOXX® Ireland Total Market Index, which rose 5.9% in dollars.
The STOXX® Developed Markets 2400 Index gained 3.9% in euros and 3.1% in dollars.
Emerging markets struggle
Developing markets had a more mixed performance, with some of the largest nations posting a negative return. The STOXX® Emerging Markets 1500 Index fell 0.1% in dollars and advanced 0.6% in euros. Eight of the 21 markets tracked by STOXX rose, led by the STOXX® Greece Total Market Index’s 11.1% jump, while 13 declined. The worst performances were posted by the STOXX® South Africa Total Market Index, the STOXX® Pakistan Total Market Index and the STOXX® Brazil Total Market Index, with average losses of 4.6%.
Thematic investing’s positive run continues
For a second month, all but one of eight STOXX revenue-based thematic indices and all three AI-driven thematic indices outperformed the STOXX Global 1800 Index. The exception was the iSTOXX® FactSet Ageing Population Index.
Factor strategies underperform
February was a challenging month for the iSTOXX® Europe Factor Market Neutral Indices, which hold a short position in futures on the STOXX Europe 600 to help investors neutralize systematic risk and focus on pure factor investing. Only two of the seven indices had positive returns: the iSTOXX® Europe Quality Factor Market Neutral Index and the iSTOXX® Europe Multi-FactorMarket Neutral Index.
Separately, the EURO STOXX® Multi Premia® and Single Premium Indices underperformed the market during February.
The STOXX® Global Maximum Dividend 40 Index, which focuses on high dividend-yielding stocks, continued its march higher as investors this year favor income strategies. The index climbed 3.9% in dollar terms during February, taking its advance since the start of the year to 13%.
- STOXX® Global 1800 Index
- EURO STOXX 50® Index
- STOXX® Europe 600 Index
- STOXX® North America 600 Index
- STOXX® Asia/Pacific 600 Index
- STOXX® USA 900 Index
- STOXX® China A 900 Index
- STOXX® Developed Markets 2400 Index
- STOXX® Emerging Markets 1500 Index
- STOXX® Thematic Indices
- iSTOXX® Europe Factor Market Neutral Indices
- EURO STOXX® Multi Premia® and Single Premium Indices
- STOXX® Global Maximum Dividend 40 Index
- STOXX® Global Artificial Intelligence Index
1All results are total returns after taxes.
2 CBS News, ‘Fed chief Jerome Powell says U.S. economy likely to slow,’ Feb 26, 2019.
3 Bloomberg, ‘Chinese Stocks Are Suddenly the World’s Best Trade in February,’ Feb. 28, 2019.