A Quick Programming Note
Starting in 2026, we’ve adjusted the format of our newsletter to deliver more focused, relevant content. Each month, we’ll begin with a market and investment-related commentary, followed by separate articles and blog posts during the month focused on financial planning, taxes, estate planning, and other topics relevant to your overall financial picture.
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February 2026 in Review
Markets were mixed during February but continued several of the trend rotations that have developed over the past few months. The primary trends continue to be international stocks outperforming their U.S. counterparts along with continued strength in real assets.
International developed markets led equity asset classes (+6.1%), driven by improving industrial activity overseas and more attractive valuations after several years of U.S. dominance. Emerging markets also gained (+2.9%) from strength across Asia, Latin America, and commodity-oriented economies as global growth expectations stabilized. Overall, global equities finished higher (+1.3%), led by foreign stocks.
Commodities rose (+1.9%), reflecting firm energy prices and continued global industrial demand. Gold (+8.7%) also ripped higher during the month amid increased geopolitical uncertainty and demand for defensive assets.
Bonds provided support as interest rates moved lower during the month. The 10-year U.S. Treasury yield declined roughly 0.25%, which helped lift bond prices and cushion modest equity market volatility.
U.S. equities have mostly moved sideways recently. Growth stocks lagged, with the NASDAQ 100 down (-2.3%), as parts of the technology and software sectors continued to face pressure from artificial intelligence competition, a theme we touched on last month and again today.
Smaller companies held up better, with small-cap stocks gaining (+2.1%), benefiting from lower interest rates and less exposure to the technology and software names that weighed on broader indexes. More value-oriented stocks also finished higher, as reflected in the Dow Jones Industrial Average (+0.3%).
All said, the broad U.S. market declined slightly for the month (-0.5%) but marginally outperformed the S&P 500 (-0.9%). Year to date, the S&P 500’s range between its high and low closing levels has been just 2.67%. That tight range suggests markets are consolidating after strong prior gains rather than experiencing a meaningful pullback.
Market Narratives
Artificial Intelligence: Disruption in the Force
Artificial intelligence remains one of the most important themes shaping markets, but investor sentiment around AI has shifted in recent months.
Earlier enthusiasm treated AI as a rising tide that would lift nearly every technology company. More recently, markets have begun distinguishing between companies that stand to benefit from AI adoption and those whose business models may face competitive pressure from it. That transition has contributed to recent weakness in parts of the software and technology sector, even as investment tied to AI infrastructure continues to expand.
Large language models can produce output that appears intelligent, even though they do not truly understand meaning or context. Still, investors have increasingly debated how AI could influence hiring decisions and spending across white-collar industries. Employment growth across software publishing and data-related services has flatlined since late 2022, around the time AI tools became widely available.
Also recently, several articles and thought pieces have highlighted potential economic consequences of rapid AI adoption. These are best viewed as scenarios (or maybe sci-fi novellas) instead of forecasts. Technological change has historically reshaped jobs and industries, but it has also expanded overall economic output.
For now, the most visible economic impact of AI is investment. Per Bloomberg, just four of the largest hyperscalers (Alphabet, Amazon, Meta, and Microsoft) are expected to spend roughly $650 billion in capital expenditures in 2026, representing one of the largest technology investment cycles in decades. Productivity gains typically follow investment with a lag, which might explain why markets are reassessing expectations after an initial wave of optimism.
Our view remains that AI will likely replace some workers, but the gains in productivity are more likely to outweigh any potential drag on employment and real wage growth. It is still too early to understand the full level of disruption. In the meantime, software companies will need to show revenue growth and AI integration to support stock price stability and returns. Markets are moving past broad enthusiasm toward a more selective phase focused on earnings durability and real-world adoption.
Tariff Ruling
On February 20, the Supreme Court struck down tariffs covering roughly $300 billion of imported goods. From a market standpoint, the decision functions similarly to a modest easing in trade friction, particularly for manufacturers, retailers, and companies dependent on global supply chains.
The ruling focused specifically on the use of the International Emergency Economic Powers Act (IEEPA) as the legal basis for certain tariffs. IEEPA-related measures account for roughly 7% of the 11% increase in the effective U.S. tariff rate currently in place.
The Treasury has collected an estimated $175 billion in tariff revenue under IEEPA, some of which may now be subject to refund. Any repayments would effectively return capital to businesses, supporting cash flow and margins in the near term (assuming refunds can and will be made in a timely manner).
Policy response was immediate. The Trump Administration announced tariffs under Section 122, which allows duties of up to 15% for 150 days without congressional approval. Beyond that, several alternative pathways remain available, including Section 301 trade investigations, Section 232 national security tariffs, and Section 338 discrimination-based tariffs. These mechanisms require procedural review and typically unfold over months rather than weeks.
From a market perspective, growth impacts appear mixed. Tariff rates are likely to settle somewhere between prior levels, providing a modest tailwind to growth, but renewed trade policy uncertainty may offset some of that benefit. Overall, we would not expect a meaningful change to 2026 growth resulting from the ruling.
Iran and Oil Markets
Markets opened March lower, focused on geopolitical risks. Some of it comes back to a more familiar question: what happens to oil when conflict reaches the Middle East?
Following the escalation, oil prices moved sharply higher, with Brent crude briefly jumping more than 10% and trading above $80 per barrel as markets priced in potential disruption to shipments through the Strait of Hormuz, which carries roughly 20% of global oil exports.
Geopolitical conflicts tend to affect markets primarily through oil prices and inflation expectations, which then influence interest rates and equity valuations. History provides perspective. The geopolitical shock that produced lasting market damage was the 1973 Yom Kippur War and resulting oil embargo, when supply was materially reduced for an extended period. By contrast, conflicts that did not significantly interrupt oil production or transportation have often resulted in shorter-lived market reactions as attention returned to earnings and economic growth.
However, the U.S. is far less vulnerable to temporary energy price spikes than it was in the 1970s. The U.S. is now a net oil exporter and advances in production technology allow domestic supply to respond more quickly to higher prices.
Research from Carson Group shows that while geopolitical shocks often create near-term volatility, markets have historically recovered relatively quickly. Across major global events, the S&P 500 has been higher a median of more than 5% six months later, particularly when economic fundamentals remain stable.
Markets had already begun pricing in rising tensions over the past several weeks, but the recent move reflects a reassessment of downside risks rather than panic selling. As with most geopolitical events, the path of oil prices in the coming weeks will likely determine whether volatility stabilizes or broadens into a more sustained economic concern.
Closing Thoughts
Geopolitics have introduced additional volatility across global markets, particularly as investors assess potential impacts on energy prices and inflation expectations. Even with that backdrop, the broader market environment remains consistent with adjustment rather than deterioration.
Markets appear to be transitioning rather than breaking. Leadership is broadening beyond U.S. mega-cap technology, international markets are improving, and investors are becoming more selective as AI expectations normalize.
That shift may result in steadier but less concentrated returns than investors experienced over the past several years. In our view, that is a healthier backdrop for long-term markets, even if it feels less exciting in the short run.
Periods like this tend to reward diversification and discipline rather than chasing the dominant theme of the moment.
Thank you for reading.
