We share our latest observations on global asset markets

All movements are expressed in United States (US) dollar terms, unless otherwise stated.

Key points

• Without any doubt, the conflict with Iran has created an extraordinary level of uncertainty for markets to contend with and this overshadows many of the comments we have made in relation to February. This situation should be motivating equity investors to seek exposure to geographies, sectors and themes which have attractive valuations and lower risk profiles. We favour defensive sectors such as electric utilities to which T8 Energy Vision has significant exposure.
• For the second consecutive month, seemingly unperturbed by escalating geopolitical tensions (especially in the Middle East), global equities continued their strong start to the year. Again, US indices lagged those in Europe and Asia as US technology stocks contend with market scepticism about the outlook for artificial intelligence (AI).
• T8 Energy Vision generated a positive return for the month, significantly outperforming global equities with comparable realised volatility (a common measure of risk). Please refer to the monthly report for detail specific to the performance of the fund.
• We attribute the strong performance to the growing realisation that energy is the key obstacle to the growth of artificial intelligence. We maintain our particularly positive outlook for the electricity sector which is driven by structural, secular and cyclical tailwinds all converging.
• We believe that investors will not be able to get sufficient exposure to this thematic via major indices and therefore a deliberate allocation to a strategy such as T8 Energy Vision should be contemplated.

Market update

For the second consecutive month, seemingly unperturbed by escalating geopolitical tensions which culminated in the US and Israel commencing joint attacks on Iran after US markets had closed for February, global equities continued their strong start to the year.

Major US indices fell while those in Europe and Asia generated strong returns. Large-cap technology stocks were the main driver of this as markets contend with polarised views on the outlook for artificial intelligence (AI). On one hand, scepticism about the profitability of AI-specific business cases while on the other, fear of disruption of established industries.

This was particularly evident in software stocks which were under pressure as new ‘agentic’ AI coding tools (such as Anthropic’s Claude‑based agents) created a sudden perception that valuable software intellectual property which was built over decades could be easily replicated by AI. Notable examples were Adobe and Salesforce which have fallen by 25.0% and 26.5% year-to-date, respectively.

We believe that exposure to growing electricity demand is the best risk-adjusted way to be exposed to the AI thematic on the basis that it isn’t dependent on identifying the winners in AI itself.

Without any doubt, the conflict with Iran has created an extraordinary level of uncertainty for markets to contend with. Looking ahead, we remain of the view that investors should be mindful of a number of risks, including:

• elevated risks associated with the various geopolitical conflicts (especially the conflict in Iran);
• elevated US debt levels;
• the unsustainably high US budget deficit;
• the likelihood that US government policy exacerbates these issues (at least in the short term);
• the US Federal Reserve losing its independence;
• the recent US Government shutdown which may have distorted vital economic data; and
• uncertainty in relation to the impacts that tariffs will have on the US and global economies (especially on inflation, employment and economic activity).

We believe that these factors, combined with US equities indices trading near to all-time highs should be motivating equity investors to seek exposure to geographies, sectors and themes which have attractive valuations and lower risk profiles.

We particularly favour defensive sectors such as electric utilities to which T8 Energy Vision has significant exposure. We observe that the utilities sector is benefitting from growing electricity demand in developed markets for the first time in a decade (driven by the data centre boom), which is a genuinely attractive attribute in addition to its well-known defensive characteristics.

Macroeconomic data

Inflation data

Reporting of the Core Personal Consumption Expenditures Price Index (Core PCE) resumed following the government shutdown, and came in at 3.0% year-over-year which was higher than market expectations of 2.9% and the prior reading of 2.8%. Inflation remaining elevated is sub-optimal for the broader economy given there is still a risk of inflationary impacts from the US-induced trade war and there is likely to be an inflation bump from the escalated conflict with Iran. Elevated inflation is a key impediment to further interest rate cuts.

Employment data

We believe the recent government shutdown, sudden replacement of the Bureau of Labor Statistics Commissioner and dramatic decline in US immigration makes US labour market data more difficult than usual to interpret. The February non-farm payrolls reported 130 thousand new jobs created which was considerably above expectations for 65 thousand. Accordingly, the unemployment rate ticked down 10 basis points to 4.3% which remains low and at a level which is very unlikely to worry the Federal Open Market Committee (FOMC).

Interest rate expectations

The minutes of January’s FOMC meeting (released in February) indicated divergent views on the committee with some participants seeing room for more cuts if inflation fell as forecast, while others saw scope for hikes if inflation remains above target levels. It is therefore notable that Australia’s central bank increased interest rates during February in response to above-target inflation. This was the first interest rate hike since the 2024-2025 easing cycle from a major, developed-economy central bank. Notwithstanding this and the caution expressed in the FOMC meeting minutes, at the end of February the market was still pricing in two more interest rate cuts for 2026 (with the first at the July meeting). We note that at the time of writing in early March the market was no longer pricing-in any rate cuts for 2026.

Consumer confidence

Consumer confidence continues to oscillate in weak territory with a level of 91.2 in February up from 84.5 the prior month (you will recall that consumer spending accounts for nearly 70% of US economic activity and that readings of less than 100 indicate a more pessimistic than normal outlook).

Market impacts

Bonds

Global bond benchmarks (Global Aggregate Bond Index +1.1%) rose as bonds benefitted from rotation within equities and increased risk aversion. US Treasury yields fell as the yield curve flattened. The yield curve is at the flat side of normal with the 10-year/2-year spread at 56 basis points.

We remain mindful of risk at the long end of the curve on the basis that a yield of approximately 4.5% on 20-year US Treasuries may not be sufficient compensation for the risk of lending to a government with a debt level of 125% of gross domestic product and an outlook for material budget deficits for the foreseeable future. We would expect the conflict with Iran would not help this situation.

Currencies

While the US dollar strengthened (US Dollar Index +0.6% to 98) it remains range-bound within the trading range observed during the second half of 2025 (US Dollar Index 97-100). A breakout in either direction could be the catalyst for a more significant move with implications for other asset markets. Looking ahead with this in mind, we’re mindful of the US dollar’s safe haven characteristics which is likely to see it strengthen during the Iran conflict, while longer term, we anticipate headwinds driven by US interest rate easing (the consensus ‘neutral’ interest rate is between 2.25% and 3.25%, relative to the lower bound of the target federal funds rate at 3.50%) and the momentum of emerging markets in 2026.

We believe that questions in relation to the US currency’s role as a global safe haven (driven by investor concerns about US economic policies such as tariffs, budget deficits as well as political interference with the US Federal Reserve and government agencies such as the Bureau of Labor Statistics and its role in the conflict with Iran) will add to the headwinds facing the US dollar by encouraging capital to diversify into other markets.

Commodities

Momentum in commodity prices and the metals and energy sectors continued in February, having been recognised as cheap and unloved with geopolitical safe‑haven benefits together with elevated demand from the AI boom and energy‑transition.

Precious metals

The momentum in gold (+7.9%) and silver (+10.1%) continued, driven by rising Middle East tensions and supported by falling real yields. Significantly, the correction which began in late January and continued into early February was decisively bought, which we believe indicates robust underlying demand.

We have provided more detailed observations in relation to gold and silver in a separate report.

Industrial metals

Momentum in copper (+1.7%) also continued, driven by excitement about future demand from the data centre boom and electricity grid upgrades (neither of which are new). You will recall that last month we reflected that ongoing mine supply disruptions is a more material (albeit temporary) factor behind the strong copper price.

Energy

Oil (brent crude +2.5%) continued to strengthen, driven by rising geopolitical risk premia.

Equities

Unperturbed by ongoing geopolitical tensions, global equities (MSCI World Index +0.6%) continued their solid start to the year.

While the major US indices (S&P 500 Index -0.9%, Nasdaq 100 Index -2.3%) declined, this was the result of continued pressure on the largest stocks (Magnificent Seven Index -7.3%). Equally weighted indices fared much better, posting positive returns (Equal Weighted S&P 500 Index +3.4%) and reflecting a rotation away from the very large and expensive AI/technology into cyclicals, defensives and financials which are trading on more attractive multiples.

Europe (FTSE 100 Index +6.7%, CAC 40 Index +5.6%) and Asia (KOSPI Index +19.5%, NIKKEI 225 Index +10.4%) outperformed as investors sought global diversification out of the US. According to JPMorgan February experienced the biggest four-week inflow to international equity funds on record.

From a factor perspective within the US, once again value stocks (+2.4%) outperformed growth stocks (-3.4%) and small caps (Russell 2000 Index +0.7%) outperformed large caps (Russell 1000 Index -0.6%), which was consistent with increasing market breadth and the equal weighted indices outperforming headline market-capitalisation-weighted indices.

Future energy stocks

The future energy universe declined (Clean Energy Index -1.9%). We note that the Clean Energy Index contains a significant number of small, loss-making energy technology companies with high short-interest. We believe the performance of the Goldman Sachs ‘highest short interest basket’ (-4.5%) indicates it is likely that many of the index’s constituents were under pressure from short-selling, which would have contributed to the index’s negative performance. We note that T8 Energy Vision has only eight positions (aggregating to approximately 12% of the net asset value of T8 Energy Vision) which overlap with the Clean Energy Index’s 149 total holdings.

Outlook

Looking past the conflict with Iran, we observe that structural, secular and cyclical tailwinds are converging for energy stocks. Global energy demand growth is accelerating – especially in advanced economies. In 2025, US electricity demand grew at nearly five-times the 10-year average. Electricity is booming, driven by data centres (a secular growth trend) and the electrification of road transport (a structural shift).

We believe that electricity is the key constraint to the growth of artificial intelligence. Electricity is much more scarce than the risk capital required to fund the development of AI models and build the data centres.

The winners in this boom will include energy generation, grid infrastructure, energy storage and electrification (as well as their supply chains, including critical raw materials).

The world (and especially developed markets) needs more electricity generation. Our expectation is that this need will be met by a variety of different generation types, namely nuclear, gas and large-scale renewables. The lead time and cost of new nuclear and even gas-fired electricity generation creates a fertile environment for large-scale renewables, notwithstanding the prevailing perception to the contrary (especially Donald Trump’s ‘drill, baby, drill’ comments and open hostility towards renewables). We refer you to a short summary of our expectations for the future energy mix in the US.

Falling US interest rates (175 basis points of cuts so far in this cycle) is an additional tailwind for electric utilities and their supply chains (these industries have historically displayed very high sensitivity to interest rates). We expect that falling US interest rates will remain a tailwind on the basis that the consensus ‘neutral’ interest rate is between 2.25% and 3.25% (relative to the lower bound of the target federal funds rate at 3.50%) indicating that further easing remains the base case.