Markets in many developed countries continued doing well. The MSCI World Index (hedged into AUD) rose 0.9%, up 19.2% over the past 12 months. These numbers don’t include the market response to the conflict in the Middle East, as that began after markets closed on 28 of February.
USA
US shares lagged behind other markets in February. The S&P 500 fell 0.8%. This was largely due to changing opinions about AI: how AI may shake up industries and replace some jobs, and also how big the spending on AI might be, and whether investors are comfortable with that level of spending.
Asia
Emerging markets also moved up in February. The MSCI Emerging Markets Index (unhedged) rose 3.7%. The MSCI Korea Index jumped 22.0% and the MSCI Taiwan Index gained 11.8%, adding to a great start to the year. A lot of this is because semiconductor and tech companies have been doing well. They make up a large portion of emerging market indices, and investors expect them to keep benefiting from global demand for AI data centres, chips, and high-end computing.
Europe
Europe had a strong month. The MSCI Europe Index (in Euros) rose 3.9% in February. Better economic signs and company profits held up reasonably well which helped investors feel more confident. The European Central Bank (ECB) kept interest rates at 2.0% and said it wants to stay patient and maintain a data-dependent approach. The ECB currently expects inflation to settle around its target level.
Australia
Australian shares rose 3.9% in February. The biggest boosts came from Financials (+9.0%) and Materials (+8.9%), and Consumer Staples and Utilities also helped. On the downside, Healthcare (‑13.0%) and Information Technology (‑8.0%) pulled returns lower. Investors were also watching inflation and what the Reserve Bank of Australia (RBA) might do next. At its February meeting, the RBA lifted the cash rate to 3.85%. Later in the month, Australia’s CPI data showed annual inflation was steady at 3.8%. Markets are pricing in more rate rises during 2026 because inflation is still above the RBA’s target range.
Currency and bonds
In the US, the 10‑year Treasury yield dropped 30 basis points to 3.96%, which helped Overseas bonds return 1.4% in February. In Australia, the 10‑year government bond yields fell 15 basis points to 4.65%, and Australian bonds returned 0.9% for the month.
The Australian dollar kept strengthening in February, rising 1.7% against the US dollar. This happened as Australia’s inflation stayed firm and people expected more rate hikes here, while the US dollar weakened against most major currencies.