Global Market Commentary - February 2023

Wahed Editor
March 12, 2023
Global Market Commentary - February 2023

After accelerating into the new year, global markets slowed in February, as old concerns about inflation and higher interest rates resurfaced. The MSCI World Islamic Index fell by 2.6% in February, while the Dow Jones Sukuk Index fell 1.0%.

As the month began, markets remained bullish on the Fed’s eventual pivot to ending the interest rate hike cycle and possibly cutting interest rates as early as the end of 2023. The Fed fueled this early optimism with a 0.25% “dovish hike” on February 1 that slowed the pace of earlier hikes in 2022, as well as encouraging remarks from Chairman Jerome Powell that, while there was still had more work to be done, monetary conditions had noticeably tightened and the disinflationary process had begun. 

As the month progressed, however, the optimism faded as payroll and employment data surprised to the upside week after week, while the January CPI reading showed inflation beating expectations. Whereas market participants had previously debated whether the hiking cycle would result in a “hard landing” or “soft landing” for the economy, they were now considering the possibility of a “no landing”, in which the economy would simply continue to grow and overheat, and higher interest rates would continue to weigh down on valuations.

By the end of February, it became clear that the market had been too quick to anticipate the end of above-target inflation and the Fed’s pivot. The S&P 500 finished the month down 2.6%, and 5.0% from its intra month peak.

Meanwhile, in Europe, the “no landing” scenario became more likely, as economists no longer predicted a recession in 2023. The main contributor to these revisions was the surprisingly warm winter, which reduced the need for energy reserves and lowered gas prices. The European stock markets, which had long been undervalued, fared better this  month, with many of its key country indices trading at all time highs.  

The reopening of the Chinese economy is starting to improve regional consumption and production, which has improved the outlook for its equity markets and the global markets in general. Geopolitical tensions, on the other hand, dampened market sentiment in February, as China and the US struggled to see eye to eye on allegations of spying, data security, and militarily aiding the Russia-Ukraine war.   

Heading into March, a series of US economic data releases could chart the course of the markets for the next few months. 

On the one hand we have a favorable technical backdrop in which the S&P 500 has been above its 200-day moving average since January and its lows have been progressively higher, both of which are signs of upside momentum. 

On the other hand, the labor market remains tight, raising concerns about the persistence of inflation, especially in the services sector and potentially prompting the data-dependent Fed to hike interest rates even further and keep them higher for longer. 

Therefore the US payroll, unemployment, and CPI data coming out in the first half of March, as well as how the Fed reacts, could send the markets on a sky high rebounding trajectory, or retest the market lows of late 2022 before we see any economic recession–though with lower equity valuations, lower gas prices and a reopened China as fundamental improvements since then, we believe the market is better equipped now to handle a higher interest rate environment.


This material has been distributed for informational and educational purposes only and the opinions expressed represent the views of the author and not necessarily those of Wahed Invest LLC or any of its affiliates, directors or personnel (“Wahed”).  Any assessment of the market environment as of the date of publication is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice. Wahed assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. Any strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security.

Furthermore, the information presented may not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services and should seek advice from an independent advisor before acting on any information presented.

Any links to third-party websites are provided strictly as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites nor do we endorse the content and information contained on those sites. When you access one of these websites, you are leaving our website and assume total responsibility and risk for your use of the third-party websites.

Other Articles

The double edge sword of AI

The double edge sword of AI

Just a couple of weeks back, we have seen the release of an AI generated image that was virally spread through a verified account on Twitter, “Bloomberg Feed” (unaffiliated to Bloomberg News) which shows a massive plume of thick smoke near what looked like a government building. Together with the image, a click-bait title reads; “Large Explosion near The Pentagon Complex in Washington D.C.” What does this mean for investors living in the age of rising AI?
Global Market Commentary - March 2023

Global Market Commentary - March 2023

Global markets continued their upward albeit volatile trend in March, with fresh concerns about the stability of the banking systems in the US and Europe dominating the headlines. Despite this, the MSCI World Islamic Index rose by 4.7% in February, while the Dow Jones Sukuk Index rose by 1.3%.
Wahed acquires iWill Solicitors to help Muslims prepare for the future

Wahed acquires iWill Solicitors to help Muslims prepare for the future

Wahed, a financial investment company that aims to advance financial inclusion through accessible, affordable, and values-based investing, today announced that it has acquired leading online Islamic wills provider iWill Solicitors. 

Start your journey to wealth

Download the App now