February was a challenging month for financial markets, marked by heightened volatility and renewed geopolitical tensions. The US economy, which had led the global recovery narrative, now faces growing uncertainty amid escalating trade disputes triggered by President Trump’s protectionist policies. Tariffs imposed on China, Canada and Mexico have triggered retaliatory measures, unsettling investors and raising concerns about disruptions to global trade flows.

Inflation dynamics are increasingly diverging between the US and Europe. While euro area inflation continues its gradual deceleration, US core inflation remains stubbornly elevated. Recent tariffs, combined with robust labor market conditions and pro-growth policies, are fueling fears of more persistent inflationary pressures in the US.

In this environment of heightened uncertainty and volatility, bonds have demonstrated their value as effective diversifiers against equity market losses. Our preference for investment grade bonds over high yield remains intact, given the limited extra yield offered by riskier credits.

We hope you enjoy reading and find these updates helpful for the month ahead.