Explore the monthly market wrap-up, a summary of the key trends, emerging players and market movements.

Key market movements that caught our attention in February:

Reflections on Woolies' business tactics, inflation reality and a glimpse at the global markets. 

A month of turbulence for our largest supermarkets has left people wondering whether products are intentionally left off shelves due to high prices and subsequent bad publicity. Earnings from the two powerhouse supermarkets, Woolworths and Coles, were strong. Although Coles announced sales grew 4.9% since the start of the year, Woolworths saw just a 1.5% increase in the same period. A fact that supermarkets typically perform at a stable level in times when the Australian economy is weaker at a personal level than it’s perceived.

Tech stocks drove the market trend in the US to be positive while concerns arose regarding small-cap earnings decline and overvaluation in certain sectors. Nvidia topped the $US2 trillion market cap mark in Feb, after releasing stronger-than-expected earnings. The S&P 500 rose above 5,100 points, the highest level it has ever seen.

Jerome Powell appeared on 60 Minutes and his remarks dampened expectations of a rate cut, adding to market uncertainty. The interview was then followed by hot inflation data, which bumped up treasury yields and the expectation of a rate cut pushed back to June.

US presidential election, Biden's document mishap and Bullish market trends. 

The presidential race is heating up with each respective party conducting primaries to determine who will lead the parties. Earlier this month, Biden was being investigated for knowingly taking classified documents when leaving the VP role in 2017. It was found Biden mishandled classified documents but won’t be charged. The prediction of Trump being elected to be the next president has gained momentum over the month, with no clear picture of what his possible presidency will look like.
 
At the first RBA meeting of the year there was a feeling of denial for the possibility of interest rate hikes through the messaging from RBA Governor Michelle Bullock: “I think the signs are good, but we have to remain vigilant.”

Discoveries of Hydrogen, Changes in Inflation and Australian Labour Market Squeeze

Positive news of the significant hydrogen amount we have globally, as a 200 tonne per annum deposit was found in Albania. The key ramification is although most of the hydrogen is likely inaccessible, what is, can dramatically increase supply and therefore drive the price down.

A higher percentage of Australians working two jobs compared to the US, which is reason to be concerned. Although, it indicates there is work around and bank reporting continues to show that loan losses are low. The difference in outstanding mortgage rates in the US and Australia is large as the US mortgage market is heavily hedged towards fixed rate 30-year terms. Therefore, the Fed rate does not influence the same proportion of the population directly through mortgage repayments. On the other hand, Australia has a raft of fixed-rate loans coming off to variable rates.

In the US all signs point to a no-landing scenario with an economy booming and a market to match. You just need to connect the significant and continuous federal government support initiated by the Biden Administration with the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS Act, all of which have together propelled spending on manufacturing-related construction to all-time highs. The incumbent office is certainly doing its part to sidestep a recession.

Will's February market comments:

"Expectations on rate cuts are continuously shifting, aiding the growing uncertainty in the global economy. Outliers such as New Zealand, where an ANZ forecast positioned the RBNZ to hike rates, indicate that perhaps there is more to be done and the peak has not been reached. Expectations on rate cuts in the US are moving forward into the future, as a result of sticky inflation which can somewhat be attributed to fiscal stimulus. Nvidia's large surge at the back end of February, as well as strong earnings across the board, have given investors some confidence, although markets are treading cautiously around key data prints as there is no clear outlook for inflation."