Kai W. Hong, CFA
Managing Director & Chief Investment Strategist

The market enthusiasm which pushed the Dow above the 20,000 level late last month continued unabated as investors seemed to focus more on potential upsides to policy rather than uncertainty and downside risks. While talk of deregulation and tax reform in the US was enough to stoke markets’ animal spirits, the consolidation and persistence of these levels is likely going to require a fair amount of fundamental improvement with only modest room for disappointment. However, it seems that FoMO (Fear of Missing Out) could be just as strong in markets as it is in the social media context. Against that backdrop, the US Fed held off on increasing interest rates at their February meeting but spent much of the latter part of the month laying the ground work for coming hikes given optimism about the US economy. Risk appetites in markets outside of the US wavered as people continued to try to assess the economic nationalism espoused by the new US administration and its potential impacts on trade and global growth.

The Russell 3000 Index finished the month at +3.7%. At the sector level, Health Care, Technology and Financials were leaders while Energy was the only sector down for the month. US small cap stocks were again more muted with the Russell 2000 Index returning +1.9%. Outside of the US, market performance was also positive as the developed market MSCI World ex USA Index returned +1.2% while the developing market MSCI Emerging Markets Index returned +3.1%.