Market review
- February continued rotation in markets ahead of the Middle East conflict
- Japan led global equities higher; US lagged
- Fixed income markets mostly positive
All the Liontrust Multi-Asset funds and portfolios delivered positive returns in February. For much of February, the predominant market news related to President Trump’s reimposition of tariffs after the Supreme Court ruled them to be illegal and the decisive election of Japan’s new reformist prime minister. The former briefly unsettled markets, while the latter was a significant boost for Japanese equities. Generally, however, markets were continuing their recent theme, namely a rotation away from the US stock market towards other regions providing a notable dispersion of returns between them.
The calm was ended abruptly by US and Israel launching Operation Epic Fury on Iran. There had been less than subtle hints of this course of action following the civil unrest in Iran earlier in the year, but the news caused volatility which was most pronounced in energy markets. At the time of writing, the conflict remains at an early and unpredictable stage.
Before this, February’s dispersion of returns can be seen in the regional equity performances in sterling terms. US equities delivered a modest 1.7%, contrasting sharply with Japan’s 9.0% return. Asia ex‑Japan equities rose 6.9%, the UK and emerging markets both increased 6.1% and Europe ex‑UK was up 2.3%. The figures reflected 12-month performances in sterling terms to the end of February, which included emerging markets (40.7%), Asia ex-Japan (37.4%), Japan (31.5%), the UK (26.1%) and Europe ex-UK (18.7%) with the US trailing at 13.6%.[1]
Such rotation could be seen to some degree last year when investors who had spent years favouring US growth and technology stocks began reallocating capital into cheaper, unloved regions such as Japan, Asia ex-Japan, emerging markets and the UK, all of which the Liontrust Multi-Asset team has been tactically overweight.
Commodities rose strongly in February on elevating geopolitical concerns in the Middle East. Gold and crude oil were up 8.4% and 7.9% respectively in USD dollar terms.[1]
Fixed income markets mostly positive
Fixed income markets were broadly positive over the month, and global aggregate bonds were up 0.3% in US dollar terms. Government bonds had a solid month; UK gilts delivered 1.8%, and US Treasuries returned 1.4% in US dollar terms.[1] Ebbing inflation increased confidence in rate cuts continuing in 2026 in both countries. These expectations were reinforced in the UK by weak economic data and continued easing of fiscal concerns after the autumn budget.
Our tactical outlook rating for global government bonds is a positive four out five. They now offer real yields across most major markets and raising our allocation to them enhances diversification, reflecting the varying interest rate policies worldwide. They should benefit from falling inflation and risk-off sentiment, which typically drives investors towards haven assets.
Global high yield and corporate bonds both eased in February, returning -0.8% and -0.2% respectively in US dollar terms. They were strong performers longer term, however, returning 12.3% and 11.5% over the 12 months to 28 February in US dollar terms.[1]
Outlook
Despite the elevated geopolitical tensions that dominated market news flow at the tail end of February, we have yet to see sufficient global disruption to undermine our cautiously optimistic stance. We will remain alert to the risk of potential escalation or a protracted period of inflated oil prices and its commensurate impact on inflation.
Over the long term, investment markets have demonstrated an excellent ability to translate revenues to profits and these profits to returns for shareholders, but these long-term rewards were achieved by disciplined investment through the challenges rather than by avoiding them altogether.
The Liontrust Multi-Asset team was well positioned for the market rotation that was evident in 2025. We believe that attractive long-term investment opportunities remain for patient and disciplined investors. Market volatility is an inevitability and diversification is an important means through which investors can reduce their sensitivity to market tumult as and when it occurs. We continue to believe that in a world in which there are major geopolitical, social and economic changes taking place, market leadership will also continue to evolve.
In a period of profound change, it is also imperative to look for differentiated investment opportunities rather than allowing portfolio inertia to hold onto positions on the basis that investments which did well in the past will inevitably do well tomorrow.
It is worth bearing in mind that while market dynamics evolve, if history is any sort of guide, a diversified, disciplined and differentiated investment portfolio will navigate challenges new and old over the medium to long term.
[1]Source: Bloomberg, 3 March 2026
KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
The Funds and Model Portfolios managed by the Multi-Asset team may be exposed to the following risks:
- Credit Risk: There is a risk that an investment will fail to make required payments and this may reduce the income paid to the fund, or its capital value;
- Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss;
- Liquidity Risk: If underlying funds suspend or defer the payment of redemption proceeds, the Fund's ability to meet redemption requests may also be affected;
- Interest Rate Risk: Fluctuations in interest rates may affect the value of the Fund and your investment. Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result;
- Derivatives Risk: Some of the underlying funds may invest in derivatives, which can, in some circumstances, create wider fluctuations in their prices over time;
- Emerging Markets: The Fund may invest in less economically developed markets (emerging markets) which can involve greater risks than well developed economies;
- Currency Risk: The Fund invests in overseas markets and the value of the Fund may fall or rise as a result of changes in exchange rates;
- Index Tracking Risk: The performance of any passive funds used may not exactly track that of their Indices.
- ESG Risk: there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG.
The risks detailed above are reflective of the full range of Funds managed by the Multi-Asset team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
DISCLAIMER
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It should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets.
This information and analysis is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
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