Issue link: https://info.seic.com/i/1517005
Executive Summary • In February, we saw a continuation of the leadership of artificial intelligence (AI) associated names. There continues to be a lot of enthusiasm for the future of AI applications, which helped to drive the U.S. (S&P500) and Japanese (Nikkei 225) stock markets to all-time highs (Reuters). • AI mania once again helped U.S. stocks to lead the major asset classes around the world, with all other major equity markets delivering positive returns. Conversely, corporate and government bonds continued their sluggish start to 2024 and commodities fell despite climbing oil prices. • U.S. growth continued to surprise on the upside as early data suggested the economy is still growing above expected pace. Disappointing UK and European data surprised to the downside, but Chinese equities finally showed hints of a revival off the back of more supportive government policies that will hopefully plant the seeds for an economic recovery. Economic Factors Interest Rates • Central banks remain hesitant to cut interest rates. Rhetoric from central bankers suggests they will wait for weaker wages and services inflation. Inflation • February showed that inflation is unlikely to decrease as dramatically as it has in the last six months. Higher crude oil prices are also starting to affect prices again. Economic Growth • Interest rates continue to bite across the world, particularly in Europe, and economic reacceleration does not look to be around the corner. While the U.S. remains strong, a slight deceleration is likely in the short term. Tactical Views Commodities • Ongoing geopolitical tension in the Middle East, a hint of a China resurgence and fear of further global shipping disruptions could fuel a prolonged rebound for commodities. U.S. Large Cap Equities • U.S. equities remain very concentrated. The valuation gap between the seven largest companies and the rest of the market is extreme, thus making diversification a must to protect against any sign of disappointment for those seven names. Legend SEI's Current View: Direction of movement from previous: Pessimistic Optimistic SEI Monthly Update. February 2024 Pessimistic Optimistic Pessimistic Optimistic Pessimistic Optimistic Pessimistic Optimistic For use by advisers of regulated intermediaries in the UK in acceptance with all applicable laws and regulations