February 2025 brought renewed volatility as “US exceptionalism” began to fade under Trump’s second term. Protectionist rhetoric and stretched valuations hit US equities, while Europe gained on plans for a €1tn fiscal boost and China rallied after signs of private sector support. Umbra MPS portfolios dipped modestly, impacted by sterling strength and limited US exposure, but alternatives like gold and property offered resilience. Diversified positioning and a balance between defensiveness and cyclicality leave Umbra MPS well placed to navigate shifting cycles.
After a euphoric post-election rally, cracks appeared in February as US markets reassessed Trump’s protectionist stance and growth outlook. The Citi Economic Surprise Index fell, and the administration itself acknowledged near-term recession risks as it pushed to rebalance the economy. US equities, trading at stretched valuations, sold off sharply (S&P 500 –2.6%, Nasdaq –6.7%), while concentration risk around the largest names added fragility.
In contrast, Europe strengthened on the prospect of a €1 trillion fiscal package for defence and infrastructure, with the MSCI Europe ex-UK rising +3.7%. China rallied (+11.5%), supported by optimism around AI breakthroughs and renewed government engagement with the private sector. Value stocks outperformed growth across global markets, while large caps retained leadership over small caps amid geopolitical uncertainty and tighter financing conditions.
Fixed income provided stability, with global sovereigns (+1.2%) and UK gilts (+1%) offsetting equity weakness. Credit markets held firm, with US investment grade (+1.9%) and high yield (+0.8%) both positive. Emerging market hard-currency debt was resilient, though local currency debt lagged as tariff concerns weighed on sentiment.
Alternatives offered ballast: gold gained +1.4% in GBP terms and property rose +1.9%. Infrastructure was stable, with the sector well placed to benefit from prospective European fiscal spending.
For Umbra MPS portfolios, February was a modestly negative month in absolute and relative terms, with sterling’s appreciation reducing returns from unhedged overseas assets. Defensive positioning in healthcare helped mitigate US equity weakness, while alternatives cushioned downside. Overall, the MPS range remains globally diversified, balancing cyclical opportunities with defensiveness, and continues to be positioned to meet long-term return objectives despite short-term market noise.
