2025/02 Market Situational Awareness

February 2025 Market Snapshot: Tighter Financial Conditions Drive Cross-Asset Rotation

• Markets adjusted to tightening financial conditions through rotation rather than capitulation. Equities were mixed as leadership narrowed and investors reduced exposure to the most crowded growth and momentum trades. Value and income-oriented segments proved more resilient, while credit spreads widened modestly but remained consistent with a controlled late-cycle adjustment.

• Rates and FX dynamics reinforced policy sensitivity and macro selectivity. Treasury yields moved higher and curves stayed flat, reflecting persistent inflation vigilance and diminished expectations for near-term easing. The U.S. dollar firmed, pressuring international and EM assets, while FX volatility increased as equity-related flows became more prominent.