I hope this message finds you well. As we move through Q1 2026, I’d like to share our latest February Market Report, highlighting significant economic developments and notable developments in global markets.
Click on the video below to watch.
Key Highlights from the February 2026 Market Report:
Economy Cooling But Not Contracting
- Q4 2025 GDP growth: +1.4%, down from +4.4% in Q3 2025
- January: 130,000 new jobs added
- January inflation: up 0.2%, annual rate now 2.4% (Fed target: 2%)
- Supreme Court ruled president lacks authority for broad-based tariffs
Supreme Court Strikes Down Tariffs
- Many of President’s Liberation Day tariffs ruled illegal
- President responded by implementing new 10% tariff using alternate authority
- Average tariff rates dropped from peak but remain elevated vs. historical norms
- Created significant uncertainty for businesses and trade negotiations
Fed Holds Rates Steady
- Fed kept rates at 3.5% to 3.75% range in January meeting
- Some members suggested next move could be rate hike, not cut
- 10-year Treasury yields declining, signaling market expects lower inflation
- New Fed chair appointment coming in approximately 3 months
U.S. Stocks Flat, Sector Rotation Underway
- S&P 500 up +0.8%, NASDAQ down -1.6% year to date through February 24th
- Best performers: Energy, Materials, Consumer Staples (unusual leadership)
- Worst performers: Technology, Financials, Discretionary
- AI narrative shifted from positive to fears of obsolescence
- Major software companies hit hard as AI threatens to replace workers in legal, finance, and programming sectors
Global Markets Surge 10% Year to Date
- Non-U.S. stocks up approximately 10% vs. flat U.S. returns
- South Korea up 50% in two months (in U.S. dollar terms)
- Peru, Turkey, Egypt, Thailand, Brazil all up 20%+ in two months
- Driven by lower valuations, weaker dollar, and de-dollarization trend
- Investors reducing U.S. exposure due to unpredictable government policies
Global Economy Improving
- Swedish economy (leading indicator) turning up
- Bloomberg Commodity Index rising after three years of flat performance
- Commodity prices rallying on improving global demand
- Middle East tensions pushing energy prices higher
Commodities Positioned for Strong Returns
- Oil, gold, silver, copper all rallying
- OPEC spare capacity extremely limited
- Potential oil shock risk if Middle East conflict escalates
- Central banks continuing to diversify into precious metals
Our Perspective
February 2026 marks a significant inflection point with the Supreme Court tariff ruling reducing global tariffs, though the 10% replacement tariff remains in place. U.S. stocks face challenges from high valuations and a shift in the AI narrative from opportunity to threat, particularly impacting software and technology sectors. The sector rotation away from technology toward energy, materials, and consumer staples reflects changing market dynamics.
Global markets continue strong outperformance, up 10% versus flat U.S. returns, driven by lower valuations and the ongoing de-dollarization trend. Emerging markets like South Korea (up 50% in two months) are benefiting from improving global economic conditions, evidenced by leading indicators like the Swedish economy which is turning up.
Commodities appear positioned for continued strength based on improving global demand, limited OPEC spare capacity, and ongoing geopolitical tensions in the Middle East. The Fed remains on hold with the Fed Funds rate at 3.50% to 3.75%, with declining long-term rates signaling market confidence in lower inflation ahead.
I encourage you to watch the full video for a comprehensive discussion of these trends. As always, please reach out if you’d like to review your portfolio positioning for 2026.
Omar Bassal, CFA
Chief Investment Officer
