February delivered mixed results across major asset classes, depending on where investors were positioned. Below are the February returns for the popular benchmarks that investors track (Data provided by Y-Charts & Commonwealth Financial Network):

• S&P 500 Index: -0.9%
• Dow Jones Industrial Average: +0.2%
• Nasdaq Composite Index: -3.4%
• Russell 2000 Index: +0.7%
• S&P Target Risk Moderate: -0.76%

Markets finished the month with a risk-off tone, driven less by a single economic data point and more by uncertainty around AI’s winners and losers and renewed attention to credit quality and private-market liquidity. At the same time, several fundamentals remain constructive: jobs are still being added, and inflation appears to be cooling compared with prior periods. The underlying US economy is still growing, albeit at a slower pace. We will be watching whether credit concerns stay contained (base case) or spread into broader financing conditions (risk case).

In addition to the risks listed above, over the weekend, the United States and Israel conducted military operations in Iran. Markets have been volatile mainly because investors are reacting to geopolitical escalation and energy price risk, which can feed into inflation expectations and push out the timing of potential Fed easing. While unsettling, geopolitical events are not new to markets. Over time, we have seen repeated instances where scary headlines created short-term uncertainty, yet long-term market trends remained intact.

As an example, last year’s sweeping tariff announcements were widely expected to derail the US economy and reignite inflation. Instead, inflation continued to ease, and the S&P 500 finished 2025 up double digits. History reminds us that markets often prove more resilient than prevailing narratives suggest.

We do not view the current environment as fundamentally different.

In February, the Supreme Court ruled 6–3 that certain tariffs implemented under the International Emergency Economic Powers Act (IEEPA) were unlawful without Congressional authorization. Those tariffs were terminated on February 24th. Subsequently, the administration announced a potential pivot to a different provision of the Trade Act of 1974, which allows temporary tariffs to address balance-of- payments deficits.

Uncertainty remains, particularly regarding whether previously collected tariffs may need to be refunded. Markets will continue to digest these developments as the legal and policy framework evolves.

Market leadership in 2026 looks notably different from 2025. We have seen rotation into more defensive sectors such as Energy, Consumer Staples, and Healthcare. At the same time, traditionally growth-oriented areas, including Technology, Consumer Discretionary, and Financials, have lagged.

If defensive leadership persists, markets could experience continued near-term pressure. Conversely, if growth-oriented sectors regain leadership, recoveries can unfold quickly. Leadership shifts often happen faster than headlines suggest.

We have been discussing for months that increased volatility was likely at some point this year, particularly in a mid-term election year. This is not unusual. It is part of the market cycle and incorporated into our planning. Rather than anchoring to short-term narratives or reacting to headlines, our focus remains on disciplined execution.

Historically, the best long-term outcomes typically come from discipline during noisy, narrative-driven markets.

Our strategy has not changed.

As always, don’t hesitate to contact our team with any questions.