The Trump-fuelled sugar rush hasn't worn off yet for US markets, which reached record highs in February. The S&P 500, Dow Jones, Nasdaq and Russell 2000 all surged to new records in the middle of the month, and the Dow notched up its best record-setting streak in 30 years. The Dow closed at record highs for nine consecutive days as investors prepared for President Trump's speech to Congress, and expected tax-slashing plans and mass deregulation.
That exuberance was reflected in Kraft's (US:KHC) unsolicited - and apparently unwelcome - bid for UK stalwart Unilever (ULVR). That deal was shelved within a matter of days, but Ben Yearsley, investment director at Wealth Club, says that "with debt still cheap, sterling still cheap and lots of cash floating around corporate America, this is unlikely to be the last bid for a UK company from overseas".
The breathless nature of the market is reflected in junk bond spreads, too. The premium demanded by investors for the lowest-quality debt has fallens sharply, signalling a risk-hungry sentiment shift that is leaving some feeling queasy.
"Six weeks into [Donald Trump's] presidency and details are thin on the ground," says Mr Yearsley. The danger is that the details, when announced, will fall short of expectations and markets fall back."
Michelle McGrade, chief investment officer at TD Direct Investing, says President Trump's speech to Congress on 28 February brought "a mixed message for the markets - a trillion dollars to be spent on infrastructure - but no mention of how he is going to magically produce this sum of money. US markets have been rising on the back of Trump's spending and tax cut promises, but now they will be looking for a clear delivery plan. Without this - and with the Federal Reserve indicating it is likely to tighten interest rates - there is every chance it may come off the boil."
Healthcare was the best-performing sector over February. This is a turnaround story, following the punishment dealt to healthcare stocks during the US election last year. It was the top-performing FTSE All-Share sector over the month, according to TD Direct Investing, and AXA Framlington Biotech (GB00B784NS11) was among the top-performing open-ended funds for the month.
And biotech and healthcare stocks could have further to run because the biotech sector remains on a rare discount to the S&P 500 index. The sector remains cheap despite the end to immediate price pressure fears following Hillary Clinton's election loss. The impact of President Trump's planned repeal of Obamacare remains to be seen, however.
Banks also continue to perform well, having led a cyclical rally since the start of the year, but oil and gas stocks have come off the boil following a strong second half of 2016.
A number of oil giants, including BP (BP.), Royal Dutch Shell (RDSA) and Chevron (US:CDX), released disappointing fourth-quarter earnings. Shell reported a 14 per cent increase in fourth-quarter earnings, but the news disappointed investors who were hoping for better results after the bounceback in oil prices. At BP, the oil price helped push up profit, but an upcoming period of heavy investment by the company means that oil will need to reach $60 a barrel for it to break even.
Mr Yearsley says: "After a strong run in the second half of 2016, it is no surprise that there has been profit-taking in resource stocks. The bottom of the fund tables is dominated by natural resource funds, in addition the worst five of the FTSE All-Share sectors are resource-related. Companies in these areas, though, are generally in much better shape than a year ago, with stronger balance sheets and more of a focus on shareholder returns."
The bottom five FTSE All-Share sectors were all resource-related. Mining brought up the rear, losing 3.6 per cent, followed by basic materials, with a loss of 2.9 per cent. Oil & gas and oil & gas producers were next, both losing between 1 and 2 per cent.
The winners and where to position
AXA Framlington Global Technology (GB00B4W52V57) and JPM US Smaller Companies (GB0030880032) were among the top-performing funds over February, with both returning over 7 per cent.
Asia and emerging markets also performed well throughout February, and are cheaper than developed markets. The MSCI Emerging Markets index was up 4.3 per cent in sterling terms in February. Going forward, the main issue for emerging markets will be Trump-affected trade, but there is plenty going for many emerging countries, too.
Ms McGrade says banks are also appealing. Aside from being the cheapest sector in the UK right now, these are beneficiaries of rising interest rates and inflation. Lloyds Banking (LLOY), HSBC (HSBA) and Barclays (BARC) have returned to paying dividends and, according to Capita's UK Dividend Monitor report in January 2017, £10.4bn was paid out in dividends by the banks in 2016. HSBC, the UK's second-largest payer, distributed £7.5bn, up 17 per cent year on year, due in large part to weaker sterling.
Ms McGrade says : "Investors who are looking to gain access to banking stocks can do so via funds with a significant allocation to financials, including Schroder Income (GB00BDD2DX75), Majedie UK Equity (GB00B88NK732), JOHCM UK Dynamic (GB00B4T7JX59) and Old Mutual UK Alpha (GB00B946BX62).
