19 March 2025
Written by MYTHEO
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Amid February’s market shake-up, where US equities faced challenges, MYTHEO’s strategic diversification shone brightly. With Growth, Income, and Inflation Hedge portfolios delivering positive returns through value and international stocks, MYTHEO also capitalized on falling bond yields and rising inflation. Discover how MYTHEO transforms volatility into opportunity!

Key Takeaways
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• February was challenging for US equities, with the S&P 500 down 1.42% and the Nasdaq falling 3.97%, driven by a significant sell-off in technology stocks, while global markets gained 0.70%.
• MYTHEO portfolios remained positive in February, with Growth portfolio resilience driven by algorithmic diversification, cushioning losses through international assets and undervalued US equities despite US market challenges.
• Falling US Treasury yields significantly boosted MYTHEO's Income and Inflation Hedge portfolios, with major holdings like TLT and TIP delivering strong gains during the decline.

‍In this monthly report, we will assess the performance of MYTHEO’s portfolios in light of the financial market developments in February 2025.

1. Growth Portfolio

‍MYTHEO’s Growth Portfolio was up by 1.13% (up by 1.36% in MYR) in February 2025.

The MYTHEO Growth Portfolio ended February 2025 on a positive note, despite profit-taking in US growth stocks, which led to sharp declines in the mid-cap growth ETF (IWS) and the Nasdaq 100 ETF, down 5.73% and 2.67%, respectively.

The portfolio’s resilience was driven by its diversification into international markets and US value stocks. Investments in the United Kingdom ETF (EWU), Europe ETF (FEZ), and US value stocks (VTV) posted gains of 4.02%, 3.72%, and 0.81%, respectively, highlighting the benefits of a well-diversified strategy within the MYTHEO Growth Portfolio.‍‍
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Top 3 ETFs performance (Growth portfolio)

Bottom 3 ETFs performance (Growth portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of February 2025.

2. Income Portfolio

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‍In February 2025, MYTHEO's Income Portfolio rose by 2.84% (an increase of 3.07% in MYR).

In February 2025, the MYTHEO Income Portfolio delivered a strong gain of 2.84% (3.07% in MYR), driven by a significant shift in the bond market. US Treasury yields saw one of their sharpest reversals in recent months, with the 10-year Treasury yield declining 0.34% from January to settle at 4.2310%—its lowest level since December 2024. This marked the steepest drop since January 2023, when yields fell by 0.462%.

The pullback in yields provided a substantial boost to the portfolio, particularly for holdings tied to longer-maturity US Treasuries. Our investment in long-duration assets, such as the 20+ Year Treasury ETF (TLT), surged by an impressive 5.32%.

The rally in long-term Treasuries also lifted short-term government bonds and high-quality corporate debt. For example, our 3-7 year Treasury bond position (IEI) gained 1.43%, while investment-grade corporate bonds (LQD) advanced 2.00%.
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Top 3 ETFs performance (Income portfolio)

Bottom 3 ETFs performance (Income portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of February 2025.

3. Inflation Hedge Portfolio

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In February 2025, MYTHEO’s Inflation Hedge Portfolio recorded a gain of 3.27% (3.50% in MYR), making it the top-performing MYTHEO portfolio for the month.

Stronger-than-expected US inflation data, coupled with weaker economic indicators, led investors to increase their exposure to US assets designed to hedge against inflation. This shift fueled demand for US real assets and inflation-protected bonds. As a result, US mortgage securities (REM) surged 5.85%, real estate (IYR) climbed 3.79%, and the Inflation Hedge bond (TIP) gained 2.16%, benefiting from rising inflation and declining bond yields.

In contrast, the Agriculture ETF (DBA) declined, pressured by a 19% drop in cocoa prices from the previous month. Port data showed a more than 20% year-over-year increase in cocoa exports, alleviating supply concerns. Additionally, fears of weakening demand emerged after cocoa prices soared over 180% in 2024 due to weather disruptions in key producers Ivory Coast and Ghana. Cocoa currently accounts for approximately 13% of DBA’s total exposure.

‍Meanwhile, crude oil (DBO) and clean energy (ICLN) ETFs retreated as crude oil prices softened following a Middle East ceasefire that eased geopolitical tensions.
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Top 3 ETFs performance (Inflation hedge portfolio)

Bottom 3 ETFs performance (Inflation hedge portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of February 2025.

4. Global ESG Portfolio

MYTHEO’s Global ESG up by 1.45% (up by 1.67% in MYR) in February 2025.

In January, the Environmental, Social, and Governance (ESG) investment landscape faced headwinds following President Donald Trump’s executive order to withdraw the US from the Paris Accord. However, by February, the performance of the MYTHEO ESG Portfolio was driven more by global market dynamics than domestic policy shifts.

International assets outperformed their US counterparts, particularly as US growth stocks struggled. The iShares ESG Aware MSCI EAFE ETF (ESGD), which provides exposure to markets across Europe, Australia, Asia, and the Far East, led the portfolio’s gains with a strong 2.44% return.

The ESG Aware MSCI Emerging Markets ETF (ESGE) advanced 1.08%, buoyed by the strength of the Chinese market, a key component of the fund. Meanwhile, within the US equity space, value-focused ESG stocks (NULV) remained resilient and profitable despite broader US market weakness.
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Top 3 ETFs performance (Global ESG portfolio)

Bottom 3 ETFs performance (Global ESG portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of February 2025.

5.  Essential Products Portfolio

MYTHEO’s Essential Products portfolio was up by 0.99% (1.22% in MYR) in February 2025.

The MYTHEO Essential Products Portfolio sustained its positive momentum in February 2025, despite profit-taking in agriculture stocks that had posted strong gains in January.

After surging over 7% in the previous month, the agriculture producer ETF (VEGI) declined by 2.55%, while agribusiness stocks (MOO) fell by 1.78% as investors locked in profits. Clean energy also faced headwinds, pressured by lower crude oil prices following a Middle East ceasefire.

Market trends in February favored value stocks over growth stocks and international assets over US holdings—a dynamic reflected in the Essential Products Portfolio’s performance. The Energy Select ETF (XLE), which includes major US oil producers such as ExxonMobil, Chevron, and ConocoPhillips, benefited from its value-oriented profile, trading at a modest price-to-earnings (P/E) ratio of 14 times while offering a dividend yield of 3.30%. In contrast, the Nasdaq Index—a key benchmark for US growth stocks—traded at a lofty P/E ratio of 32.39 with a modest dividend yield of 0.57%.

Meanwhile, global wind energy stocks (FAN) outperformed, bolstered by their heavy exposure to international markets. As of late February, more than 80% of FAN’s underlying holdings were companies based outside the US.
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Top 3 ETFs performance (Essential products portfolio)

Bottom 3 ETFs performance (Essential products portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of February 2025.

Chart 1: YTD 2025 Portfolio Return in % (MYR)

Source: GAX MD Sdn Bhd, February 2025
Note: Past performance is not an indication of future performance
Balanced allocation consists of 30% Growth, 47% Income and 23% Inflation Hedge

How to calculate MYTHEO Omakase actual monthly portfolio return

For MYTHEO Omakase, the actual portfolio returns derive from the combined weighted returns of each allocated functional portfolio.
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For instance, assuming allocations of 30% to the Growth portfolio, 47% to the Income portfolio and 23% to the Inflation Hedge Portfolio, the actual portfolio return in MYR for December would be 1.06%, calculated as follows: [(30% x 3.29%) + (47% x 2.41%) + (23% x 4.99%)].

Our Thoughts
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February proved to be a challenging month for equity investors in the US, as the market underperformed relative to the broader global landscape. The S&P 500 declined by 1.42%, while the MSCI World All-Country Index managed to gain 0.70%.

‍US technology stocks faced significant pressure, with the Nasdaq Composite Index—a key benchmark for technology and growth stocks—dropping 3.97%.

The downturn was primarily driven by renewed tariff concerns. On February 12, 2025, President Trump announced the full reinstatement of a 25% tariff on steel imports and an increase in tariffs on aluminum imports to 25%. Additionally, he confirmed that tariffs on Mexico and Canada would proceed at 25% and imposed an extra 10% tariff on China.

Another major factor behind the sell-off was an unexpected contraction in the US service sector, a critical pillar of the economy. Data released in February showed that the US Services PMI for January fell to 49.7—well below the expected 53.0—marking the sector’s first contraction in over two years.
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Source: S&P Global PMI, February 2025

While the manufacturing sector remained in expansion mode, the decline in services was particularly concerning given that the US economy is predominantly service-driven. A contraction in this sector carries more significant economic implications than growth in manufacturing.

However, MYTHEO’s portfolio performance in February reflected a market correction that absorbed the impact of negative economic developments. Despite these headwinds, MYTHEO portfolios remained in positive territory across the board. This resilience was driven by the algorithm’s strategic diversification, which helped cushion losses from US market exposure through allocations in international assets and undervalued US equities that held firm against negative sentiment.

Additionally, weak economic data triggered a sharp decline in US Treasury yields, providing a significant boost to the Income and Inflation Hedge portfolios. Two of the largest holdings—TLT in the Income Portfolio and TIP in the Inflation Hedge Portfolio—delivered strong gains as they capitalized on falling yields.
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Market downturns can be unsettling, but history has shown that strategic diversification enhances portfolio resilience across various market conditions. February’s performance underscored the strength of MYTHEO’s algorithm-driven approach. Rather than reacting to short-term volatility, maintaining a well-structured portfolio allows investors to navigate market fluctuations with confidence.

More importantly, this is precisely the type of market environment where MYTHEO can play a crucial role in your long-term financial planning. The resilience of MYTHEO’s Omakase Portfolio was evident in February’s conditions. By investing in the Omakase Portfolio, your funds are strategically allocated across three functional portfolios—Growth, Income, and Inflation Hedge—ensuring a balanced and diversified investment approach.

Discover how MYTHEO can enhance your portfolio diversification today and embark on your financial journey with confidence. Take the first step towards your financial goals now.‍‍

This material is subject to MYTHEO’s Notice and Disclaimer.