February 2025 Investment Summary

A positive month for the Passive range with returns ranging from +0.17% for Passive 5 to +0.61% for Passive 1.
*P Acc share class with data sourced from FE analytics as at 28 February 2025.

February 2025 was a positive month for the portfolios.

A number of major equity markets gained, led by UK and European stocks. The FTSE 100 rose 1.5%, after positive data releases for GDP growth and retail sales. The Stoxx 600 rose 3.3% as defence stocks performed strongly with projections of increased military spending. A potential resolution to the Ukraine war supported the general market outlook. Chinese stocks edged up following continued optimism for domestic technology stocks. The S&P 500 decreased 1.3% and Nasdaq fell 3.9%. Sector performance saw Utilities and Real Estate lead gains, the largest falls seen in healthcare and technology. Market uncertainty around AI-heavy technology names and tariff-driven inflation impacts, saw investors rotate out of US equities into cheaper valued UK and European equities.

Tariff fears contributed to the risk off US sentiment, with 25% tariffs on Mexican/ Canadian imports meant to take effect at the start of March, subsequently delayed by a month at the 11th hour. Additional 10% US levies on Chinese goods fuelled investor concerns of a worldwide economic slowdown and global trade war. The US market’s heavy tech concentration remained under pressure, with worries over the sustainability of large cap technology company earnings and rich valuations. Trumps tariff proposals contributed to markets repricing inflationary pressures, 10 year US Government bond yields experienced volatility but closed lower at 4.24%, having peaked at 4.62% intra-month. The Fed held interest rates in January, as officials indicated “further progress on inflation” was needed before any new interest rate cuts. Markets price the Fed to hold rates on March 19th at 96%.

US labour market data showed payrolls increased by 151,000, slightly below forecasts. 10,000 cuts to the governments workforce contributed to a small rise in unemployment (to 4.1% from 4.0%), but growth in other sectors of the US’s jobs market and wage growth increases highlighted the labour markets stability. US consumer confidence saw its steepest decline since August 2021. Households are increasingly uncomfortable about a growing list of negative economic data and trade tariff implications, with the view tariffs would increase the cost of living.

Middle East tensions remain. The Israeli military delayed withdrawals from southern Lebanon, remaining at five ‘strategic’ positions. The US stated they are “working very hard in the Middle East and Gaza” to bring a permanent end to the war. The conflicts impact remains limited on the global economy, Brent Crude remained range-bound in the mid $70/barrel.

Central bankers have tough decisions to make following mixed data, fiscal/policy uncertainty, sticky inflation. A robust US economy, with the potential for increased spending and tax cuts, should be good for risk assets, but concerns linked to tariffs and federal job cuts are starting to show in consumer and business surveys. Regional differentiation may continue to be an important theme, with decoupled economic cycles and trade war repercussions.

WS Prudential Risk Managed Passive - Tactical asset allocation activity

We maintain an equity overweight of +1.60%, made up of a diversified basket of US, UK, Asia and GEM due to a continued preference for equities and a positive view on the broad Asia region. This is funded from small underweights in US Credit, European Credit and cash. We also hold small overweight positions in US Treasuries, UK Gilts and Real Estate (REITs).