We generally recommend that you hold investments for the medium to long-term, which we would view as being for five years or more. The monthly market commentary provides an insight into the current factors that are affecting short-term global returns but should not be viewed as a basis for making long-term investment decisions. You should consider your own investment goals and timeframes before making any such investment decisions. If you do have any concerns about where your money is invested, please contact your Origen adviser.
Introduction
Most global equity markets rose in February, but the US was the notable exception as it ended the month lower and underperformed other global indices. Investors rotated away from the US and in particular large cap technology stocks amid concerns over the potential returns arising from the significant spending on AI. Fixed income markets finished with gains. February saw the US Supreme Court rule that President Trump could not use emergency powers to impose trade tariffs. Finally, the conflict between the US/Israel and Iran began on the final day of February when markets were closed.
Most global equity markets rose in February, except for the US, which ended lower and lagged behind due to investor concerns about large cap tech and AI spending. Fixed income markets finished with gains. February saw the US Supreme Court block President Trump from using emergency powers for trade tariffs. Finally, the conflict between the US/Israel and Iran began on the final day of February when markets were closed.
Economic Overview
UK
Economic Growth
The Office for National Statistics (ONS) said the UK economy barely grew in Q4 2025, a period which was notable for uncertainty over the Budget. The economy grew by 0.1% in Q4, matching the pace in the previous period but missing the forecasted 0.2%. Production rose 1.2%, reversing the 0.7% decline in Q3, as manufacturing rebounded by 0.9% as car production normalised following August’s cyber-attack. The dominant service sector saw no growth having risen 0.2% in Q3. Construction contracted by 2.1% having risen 0.4% in Q3. On a year-on-year basis, the economy grew by 1%, below the expected 1.2%.
For the month of December, the economy expanded by 0.1%, matching expectations and follows the downwardly revised 0.2% pace in November. Growth was driven by the 0.3% expansion in the services sector. However, production output declined by 0.9%, with all four sub-sectors suffering falls, whilst construction contracted by 0.5%.
The Office for National Statistics (ONS) said the UK economy grew just 0.1% in Q4 2025, missing the forecasted 0.2% and matching Q3’s pace. Production rose by 1.2%, reversing the 0.7% drop in Q3, as manufacturing rebounded by 0.9% following a normalisation in car output after August’s cyber-attack. The services sector showed no growth, while construction fell 2.1%. Year-on-year, GDP was up 1%, below the expected 1.2%.
In December, the economy expanded 0.1% as anticipated, with services up 0.3%. Production dropped 0.9%, with all four sub-sectors including manufacturing falling, and construction contracted 0.5%.
Unemployment & Labour Market Statistics
Labour market date showed unemployment rose to its highest level in a decade outside of the pandemic period, whilst wage growth slowed. The unemployment rate rose from 5.1% to 5.2% in the three months to December, its highest level since 2015. The ONS continued to advise caution when interpreting this data as they continue to improve the response to the survey. The number of job vacancies remained broadly flat across recent periods, with early estimates showing a small increase of 2,000 to 726,000 in the three months to January.
Annual growth in regular pay rose by 4.2% in the three months to December, in line with forecasts and slowing from the 4.4% pace in the previous period. When adjusted for inflation, annual regular pay growth was 0.8%. Private sector wages excluding bonuses, a measure closely watched by the Bank of England, fell from 3.6% to 3.4%. Public sector wage growth fell from 7.9% to 7.2%, whilst continuing to be impacted by pay rises being paid earlier in 2025 than in 2024, but the ONS cautioned that this base effect has now reached its peak and will phase out over the coming months. Annual growth in employee’s total pay, which includes bonuses and can be volatile, was 4.2% and 0.7% in real terms.
Labour market data showed unemployment reached 5.2% in the three months to December, the highest since 2015, whilst wage growth slowed. The ONS advises cautious interpretation as they continue to improve survey responses. The number of job vacancies stayed steady, with a small increase to 726,000 in January.
Regular pay grew by 4.2% in the three months to December, slowing from 4.4%, with inflation-adjusted growth at 0.8%. Private sector wages, a measure closely watched by the Bank of England, fell to 3.4% while public sector growth dropped to 7.2%, with the higher rate still impacted by earlier pay rises in 2025 versus 2024, though this effect is fading. Total pay including bonuses rose 4.2% and 0.7% in real terms.
Inflation
The headline annual rate of UK inflation, as measured by the Consumer Price Index, fell to its lowest level in nearly a year in January. Inflation fell to 3% from 3.4% in December, matching expectations. Transport costs slowed sharply from 4% to 2.7%, as fuel prices fell and airfares rose at a slower pace. Food inflation rose at its weakest pace since April 2025, whilst the pace of price increases in housing and utilities and recreation and culture also slowed. However, price growth in restaurants and hotels rose at a faster rate.
Core inflation, which excludes food, energy, alcohol and tobacco prices, fell from 3.2% to 3.1%, the lowest level since 2021 and in line with expectations. Services inflation, which the BoE views as a key measure of domestically generated inflation, was slightly lower, falling from 4.5% to 4.4%, missing the forecasted 4.3%. Goods inflation slowed sharply from 2.2% to 1.6%.
UK inflation, measured by the Consumer Price Index, dropped to 3% in January from 3.4% in December, meeting expectations and the lowest level in nearly a year. Transport costs slowed sharply to 2.7%, as fuel prices fell and airfares rose at a slower pace. Food inflation was at its weakest since April 2025, and price rises for housing, utilities, and recreation also eased. However, restaurant and hotel prices grew faster.
Core inflation, which excludes food, energy, alcohol and tobacco prices, fell to 3.1%, the lowest since 2021, as expected. Services inflation, which the BoE views as a key measure of domestically generated inflation, decreased slightly from 4.5% to 4.4%, missing the forecast of 4.3%. Goods inflation slowed sharply from 2.2% to 1.6%.
US
Economic Growth
In its advance estimate, the Commerce Department said the US economy grew at an annualised 1.4% in Q4 2025, sharply below the forecasted 3% as well as the 4.4% pace in Q3. The slowdown was driven by the federal government shutdown, that resulted in government spending falling by 16.6%, the largest decline since Q3 1972 that reduced GDP by 1.15%. However, consumer spending, which accounts for more than two-thirds of the economy, remained supportive as its increased by 2.4%, although the pace did slow from Q3 amid a pullback in motor vehicle outlays. Exports declined by 0.9% having jumped higher in Q3, whilst imports also declined. More positively, fixed investment rose at a stronger pace, driven by expenditure linked to AI. Residential investment contracted for a fourth consecutive quarter, although the pace of decline eased.
The Commerce Department’s advance estimate shows the US economy grew at an annualized 1.4% in Q4 2025, sharply below both the forecasted 3% and Q3’s 4.4%. The slowdown was driven by the federal government shutdown, which led to a 16.6% drop in government spending – the largest since Q3 1972 – reducing GDP by 1.15%. Consumer spending rose by 2.4%, supporting growth, but slowed from Q3 amid fewer vehicle purchases. Both exports and imports declined after gains in Q3. Fixed investment increased, driven by AI-related expenditure. Residential investment fell for the fourth consecutive quarter, though the pace of decline eased.
Inflation
US consumer prices rose by less than expected in January amid cheaper gasoline and an easing in rental inflation, although there was an increase in underlying inflation pressures. The Labor Department said the Consumer Price Index (CPI) rose by 0.2% in January, below the expected 0.3% and follows December’s unrevised 0.3% increase. The cost of shelter, which covers rents as well as motel and hotel stays, rose 0.2%, slowing from the 0.4% pace in the previous month. Food prices rose by 0.2% having jumped 0.7% higher in December. Gasoline prices declined by 3.2%, whilst electricity prices fell by 0.1%. For the 12 months through January, CPI rose 2.4%, slowing from December’s 2.7%, although this was partly due to previous higher readings falling out of the calculation.
The so-called core CPI, which excludes volatile food and energy components, rose by 0.3%, above the unrevised 0.2% rate in December. There were notable increases in the cost of airline fares, personal care, recreation and communications. Owners’ equivalent rent rose by 0.2%, whilst healthcare costs were 0.3% higher. Apparel prices, which are impacted by tariffs, rose by 0.3%. Core CPI rose by 2.5% in the 12 months through January, just below the 2.6% pace in December, although again some higher readings fell out of the calculations.
US consumer prices increased less than expected in January, with CPI up 0.2% versus the forecasted 0.3%. Gasoline and electricity prices dropped, while food and shelter costs rose more slowly than before. Over the year, CPI rose by 2.4%, slowing from December’s 2.7%, although this was partly due to previous higher readings falling out of the calculation.
Core CPI, excluding food and energy, rose by 0.3% in January and 2.5% (2.6% previously) over the past year, with notable increases in airline fares, personal care, recreation, communications, healthcare, and apparel.
Europe
European Central Bank and Interest Rates
As expected, the European Central Bank (ECB) left its interest rate unchanged at 2%. In addition, the ECB said that its updated assessment was for inflation to stabilise at its 2% target in the medium term. The ECB noted the economy remained “resilient in a challenging global environment”, but repeated its long-standing warning about the uncertain outlook, driven by the ongoing global trade policy uncertainty and geopolitical tensions.
As expected, the European Central Bank (ECB) left its interest rate unchanged at 2% and forecasts inflation will remain near its 2% target over the medium term. The bank described the economy as resilient but maintained its warning about uncertainty due to global trade and geopolitical tensions.
Economic Growth
Eurostat’s second estimate showed the Eurozone economy grew by 0.3% quarter-on-quarter in Q4 2025, matching the flash estimate as well as the pace in Q3. Among the largest Eurozone economies, Spain recorded the strongest rate of growth of 0.8%, followed by the 0.5% pace in the Netherlands. Germany and Italy each grew 0.3%, whilst France expanded by 0.2%. On a year-on-year basis, the Eurozone grew by 1.3%, also matching the earlier estimate although slightly slower than the 1.4% rate in Q3.
Inflation
Annual inflation in the Eurozone fell from 2% in December to 1.7% in January, in line with expectations and the lowest level since September 2024. Price growth slowed from 2.1% to 2% for processed food, alcohol and tobacco, whilst energy prices suffered a bigger decline of 4% compared with 1.9% in December. However, prices rose at a faster rate for unprocessed food (4.2% compared with 3.5%), whilst the pace quickened for non-energy industrial goods from 0.3% to 0.4%. Annual core inflation, which excludes prices for energy, food, alcohol and tobacco, unexpectedly fell from 2.3% to 2.2%, the lowest level since October 2021 and below the forecasted unchanged reading. Services inflation slowed from 3.4% to 3.2%.
As expected, Eurozone annual inflation dropped to 1.7% in January from 2% in December, the lowest since September 2024. Processed food, alcohol, and tobacco price growth eased to 2%, while energy prices fell more sharply by 4%. Unprocessed food prices increased faster at 4.2%, and non-energy industrial goods rose slightly from 0.3% to 0.4%. Annual core inflation, excluding energy, food, alcohol, and tobacco, fell unexpectedly from 2.3% to 2.2%, the lowest level since October 2021. Services inflation slowed from 3.4% to 3.2%.
Asia and Emerging Markets
Japan
Preliminary data showed Japan’s economy grew by an annualised 0.2% in Q4 2025, well below the forecasted 1.6%, although this represented a small rebound from downwardly revised 2.6% contraction in Q3. Private consumption, which accounts for more than half of economic output, increased 0.1%, slowing from the 0.4% rise in Q3. Capital spending also rose at a slower pace of 0.2%. Net external demand provided a broadly flat contribution, although this was better than the 0.3% negative impact in Q3. On a quarter-on-quarter basis, the economy grew by 0.1%, missing the forecasted 0.4%.
Preliminary data showed Japan’s economy grew by an annualised 0.2% in Q4 2025, well below the forecasted 1.6%, but rebounding slightly from a 2.6% contraction in Q3. Private consumption, which accounts for more than half of economic output, rose 0.1%, while capital spending increased by 0.2%. Net external demand was flat, improving on the previous quarter’s negative impact. Quarter-on-quarter growth reached 0.1%, missing the expected 0.4%.
Market Overview
CR = Capital return; LC = Local currency
Source: Lipper for Investment Management
Past performance is not a reliable indicator of future performance
UK equities performed strongly in February, supported by the rotation out of US AI-related stocks. The FTSE 100 outperformed the mid cap FTSE 250 as it recoreded its biggest monthly gain in over three years. The FTSE 100 was boosted by good returns from sectors including healthcare, basic materials, utilities and telecommunications.
US equities, as shown by the S&P 500, suffered a loss amid a volatile month that saw a change in market leadership as investors revisited expectations for AI-related companies, particularly in view of the significant spending being undertaken. This rotation of leadership led to outperformance from sectors such as utilities, materials and consumer staples. European markets, as demonstrated by the FTSE World Europe ex UK Index, rose as they also benefited from the move away from US tech stocks, as well as signs of an improvement in economic activity in the region. The Japanese Nikkei 225 Index produced a very strong gain, with sentiment supported by a landslide victory for the LDP in elections that boosted expectations for political stability and pro-growth policies.
Asian markets performed well, as shown by the robust gain in the MSCI Asia ex Japan Index. Performance was driven primarily by the North Asian export markets such as Korea, Thailand and Taiwan, which were supported by continued demand for their technology hardware and semiconductor supply chains. However, China experienced a loss amid ongoing concerns over domestic growth as well as weakness in internet stocks. Emerging markets broadly outperformed developed markets, as demonstrated by the gain in the broad MSCI Emerging Markets Index. North Asian markets were again key drivers, whilst other countries seeing positive returns included South Africa, Brazil and Mexico.
UK government bonds (FTSE Actuaries UK Conventional Gilts Index) delivered a positive return as yields fell (prices and yields have an inverse relationship). Expectations of an interest rate cut in March supported performance, although political developments caused some uncertainty. US treasuries also saw yields fall amid optimism over interest rate cuts later in the year. Sterling investment-grade corporate bonds also rose, but underperformed gilts.
This update is intended to be for information only and should not be taken as financial advice.
CA13403 Exp:03/2027
