Tariff policy and the Supreme Court's ruling against Trump's broad reciprocal tariffs have created volatility during the month of February. The US and Iran’s nuclear negotiations have swung between supporting and reducing risk premiums on oil and gold. AI capital expenditure scepticism has weighed on US mega-cap tech. Meanwhile, a weaker dollar, strong central bank gold buying, and geopolitical uncertainty have kept commodities—especially gold—very well supported even after January's sharp correction.

Equities

US stocks had a choppy February, with the S&P 500 hovering around 6,900 as of 26 February—roughly flat for the month and up only modestly year-to-date, ending January at around 6,800 after a shifting +1.4% January. The S&P 500 is down about 1% over the past month, while the Nasdaq 100 dropped nearly 2%. These choppy conditions took place despite underlying corporate fundamentals remaining strong: as of 26 February, the S&P 500 is tracking a blended earnings growth rate of 13.2% for Q4 2025—its fifth consecutive quarter of double-digit earnings growth—with 74% of companies beating EPS estimates.

The big story has been AI and tech, where the mood has turned more cautious. Nvidia beat earnings expectations, but its stock still fell 5%. This shows that investors are closely scrutinising tech companies because they are worried that spending on AI infrastructure may have been overstated. Amazon was another notable laggard, down nearly 13% year-to-date after reporting it expects to spend $200bn in capex this year—nearly 60% more than last year and well above Wall Street's forecasts.

One of the main stories within global markets has been the brutal selloff of stocks whose business model is at risk of being disrupted by AI. This has been especially evident in the recent selloff in the software sector, which has tumbled over the last few weeks amid a convergence of legitimate long-term uncertainty about AI’s role in enterprise workflows and a valuation reset that was arguably overdue after two years of extraordinary gains. The immediate trigger for the software selloff was Anthropic's rollout of new AI-powered Cowork plugins for its Claude model, which automate workflows across legal, finance, sales, and marketing—wiping roughly $1tr in market value from the software sector. In recent weeks, Anthropic also released Claude Code Security, which scans codebases for vulnerabilities and suggests software patches, hitting cybersecurity names too. The market's reaction was swift and broad. Adobe, Salesforce, and ServiceNow have all slid roughly 25% to 30%. Intuit has fared even worse, falling more than 34% year-to-date after dropping nearly 11% in a single session. In Europe, the pain spread globally: the Stoxx Europe Software and Computer Services index dropped more than 5% in one session, with RELX losing more than 14%, and Capgemini even lower. Gartner, the IT consulting firm, saw its stock fall 30% after forecasting zero revenue growth in 2026 due to a "much tougher selling environment."

So, is the fear justified? The interesting part is that most of these companies are still reporting solid results. It should also be noted that the selloff has been indiscriminate, hitting stocks that could benefit from AI. The truth likely lies somewhere in between: AI will disrupt some business models, while for others it will ultimately be a growth driver. For now, the market appears to be broadly pricing in a worst-case scenario.

All told, the derating of “Mag 7” stocks and the sharp selloff across software and IT have heavily weighed on the Technology & Communications sector. In contrast, traditional “old economy” industries—such as Oil, Materials, and Consumer Staples—have emerged as relative outperformers. Wall Street has even coined a new acronym, HALO (Heavy Assets, Low Obsolescence), to describe the key traits investors are prioritising in stock selection for 2026.

Outside of the US, the picture has been considerably brighter. The S&P 500 has trailed both developed and emerging markets, continuing 2025’s trend that extended into early 2026. Japan's Nikkei 225 crossed 59,000 for the first time as the Takaichi trade gained momentum, while European indices have broadly advanced. In Asia, Korea’s KOSPI remains the star index with gains close to 150% year-to-date, driven mainly by memory chips stocks.

Fixed Income

US rates and credit markets have shown interesting developments lately as investors reassess growth prospects and the implications of the AI-driven capex cycle.

The US 10-year Treasury yield has traded between 4-4.3% since last August and is back again to the low end of its range. Softer retail sales, easing inflation, and hints of productivity-driven deflationary pressures have driven USD yields lower, with markets again pricing the possibility of additional Fed rate cuts.

However, support remains fiscal stimulus from the Big Beautiful Bill, lower gasoline prices, and the ongoing AI capex wave should underpin consumption and GDP growth. As a result, the 4% level appears to be a significant threshold and potential bottom, unless data further deteriorates or inflation significantly slows down.

In credit, spreads have widened moderately from January’s tight levels, returning toward December averages in both Investment Grade and High Yield. The move is led by the Technology sector, at the heart of the AI transition. The High Yield Technology sector has been underperforming the broad HY market since November, with spreads widening sharply since mid-January even as the broader market remains historically tight. In Investment Grade, the shift is more structural: after years of trading at tighter spreads than the overall market, Technology sector corporate spreads have gradually moved toward the IG market average level following heavy AI-related debt issuance. In February, they rose above the broader IG average for the first time in two decades.

Overall, AI is simultaneously supporting macro growth, potentially lowering inflation dynamics, and reshaping credit market equilibria, particularly within Technology. Upcoming data on employment, growth and inflation will be decisive for the near-term direction of US rates and the evolution of credit spreads.

Commodities

Commodities have been the most volatile asset class in February. Gold had an extraordinary January as prices rallied nearly $1,300 (+29%) intramonth to approach $5,600 per ounce before reversing sharply late in the month. The pullback followed President Trump’s nomination of Kevin Warsh as the next Fed Chair, a move markets interpreted as posing less of a threat to Federal Reserve independence than initially feared. Gold fell more than 9% in a single day in late January—its sharpest one-day drop since 1983—before recovering throughout February. Gold reached its all-time high of $5,595 on 29 January before stabilising around $5,210 by the end of February, up enormously year-over-year—roughly +74% versus a year ago. Gold wrapped up its third consecutive weekly gain in the final week of February, benefiting from US dollar weakness and tariff uncertainty.

Oil has also been active. WTI crude surged 22% to a six-month high as US and Iran tensions escalated, though prices eased somewhat after progress in nuclear talks. Brent crude was trading near $67.50/barrel in mid-February as geopolitical risks ebbed and flowed.

Forex

The US dollar has continued to weaken in 2026, extending the downtrend from 2025. The dollar index has fallen about 1.2% so far this year, following a decline of more than 9% last year. The Chinese yuan has been notably strong, climbing to its highest level against the dollar in nearly three years. The Japanese yen has been volatile: hawkish signals from the Bank of Japan have provided intermittent support, while growth concerns have triggered occasional weakness. Meanwhile, the euro has remained relatively stable, with EUR/USD hovering around 1.08.

•   Macro cycle (POSITIVE): Domestic fiscal stimulus should provide economic support in the US, China, and Eurozone. Trade uncertainties have recently deescalated and macroeconomic data has improved. In the US, macroeconomic data came in stronger than expected, building on an already solid level of economic activity, apart from the labour market.  The latest labour market data were reassuring and exceeded consensus, while consumption now-casting indicators point to a rebound at the start of 2026 following the weak December retail print. In Europe, signs of economic recovery are finally appearing in hard macro data, including rising domestic orders and improvements in labor and housing market indicators. In China, domestic consumption remains weak, but the announced cancellation of the rigid 3 red lines” framework for deleveraging the property sector should lift sentiment real estate. Government programs to support domestic demand in the service sector have also just begun. On the industrial side, China’s anti-overcapacity campaign continues to weigh on business sentiment. Meanwhile, the latest figures from Asian emerging markets point to a recovery in the global manufacturing cycle, which is promising for emerging economies more broadly. These developments support our current positive macro assessment, although we continue to monitor elevated geopolitical risks and the likely end of the global central banks’ rate cutting cycle in 2026.  

•   Liquidity (POSITIVE): liquidity conditions for financial markets remain positive overall. The Fed has ended Quantitative Tightening and is purchasing Treasury bills to ease short-term funding conditions. Continuing global M2 growth and the US dollar’s softness contribute to a supportive liquidity environment for Q1.
•   Earnings (POSITIVE): earnings remain a tailwind for equities with more sectors to show earnings growth improvement. Technology stocks will continue to benefit from the adoption of AI, while the “old economy” is set to recover from a low base.
•   Valuations (NEUTRAL): US large capitalisation stocks remain expensive while international equities are more reasonably valued. However, equity risk premiums remain low by historical standard in both the US and Europe.
•   Market Factors (POSITIVE): symphony indicators are positive at 75% allocation to equities (50% US / 25% EU).