February 2026
Summary
U.S. stocks lagged and interest rates fell during an uneven month marketed by shifting market sentiment, rising geopolitical risk, and continued murkiness on domestic trade policy. Interest rates fell, giving bonds a boost, and international equities continued to shine. The cost and consequence of the AI buildout swayed U.S. markets throughout the month with high projected CAPEX denting hyperscaler stocks, while enterprise software companies were scrutinized by investors seeking to identify possible AI casualties.
Equities
Developed non-U.S. markets continued to enjoy smooth sailing while emerging markets accelerated even further in February. U.S. equities, however, remained stuck in neutral, bogged down by conflicting forces on trade and economic growth. The AI story remains murky with investors sorting through potential productivity growth, high current costs, and future industry disruptions. Meanwhile, the Supreme Court struck down President Trump’s emergency reciprocal tariffs, kicking off a fresh round of trade policy confusion. Large cap stocks dropped half a percent in February, while small caps managed meager gains. Coming off banner years, non-U.S. markets have now posted double-digit returns through the first 2 months of 2026.
Fixed Income
The month opened with increased clarity around the future leadership at the Fed, with Trump nominee Kevin Warsh tabbed as the preferred successor to current Chair Jerome Powell. Bond investors examined Warsh’s historical stance on interest rates and the Fed balance sheet against the backdrop of the administration’s goals of increased affordability of goods and, more pointedly, housing. Treasury rates fell during the month, with the 10-year yield ending the month just under 4%. Some hiccups in the private credit market hit the headlines in February, with consequences bleeding into public markets, and providing a headwind to high yield investors.
1 – Russell 1000, 2 – Russell 2000, 3 – MSCI EAFE, 4 – MSCI Emerging Markets, 5 – Bloomberg US Agg, 6 – Bloomberg US Long Gov/Credit
7 – Bloomberg US Corporate High Yield, 8 – Bloomberg Gold Subindex, 9 – Bloomberg Commodity
Highland Consulting Associates, Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer of solicitation for the sale or purchase of specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
Disclosure Statements
Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or endorse this material or guarantee the accuracy or completeness of any information herein, nor does Bloomberg make any warranty, express or implied, as to the results to be obtained therefrom, and, to the maximum extent allowed by law, Bloomberg shall not have any liability or responsibility for injury or damages arising in connection therewith.
Source: London Stock Exchange Group plc and its group undertakings (collectively, the “ LSE Group” ). © LSE Group [year]. FTSE Russell is a trading name of certain of the LSE Group companies. “ FTSE®” “ Russell®” , “ FTSE Russell®” are trade mark(s) of the relevant LSE Group companies and are used by any other LSE Group company under license. “ TMX®” is a trade mark of TSX, Inc. and used by the LSE Group under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
Copyright MSCI 2017. Unpublished. All Rights Reserved. This information may only be used for your Internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. This information is provided on an "as is" basis and the users of this information assumes the entire risk of any use it may make or permit to be made of this information. Neither MSCI, any of its affiliates or any other person involved in or related to compiling, computing or creating this information makes any express or implied warranties or representations with respect to such information, or the results to be obtained by the use thereof, and MSCI, its affiliates and each such other person hereby expressly disclaim all warranties (including, without limitation, all warranties of originality, accuracy, completeness, timeliness, non- infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall MCSI, any of its affiliates or any other person involved in or related to compiling, computing or creating this information have any liability for any direct, indirect, special, incidental, punitive, consequential or any other damages. The MSCI information is the exclusive property of Morgan Stanley Capital International ("MSCI") and many not be reproduced or redisseminated in any form or used to create any financial products or indices without MSCI's express prior written permission. The information is provided "as is" without any express or implied warranties. In no event shall MSCI or any of its affiliates or information providers have any liability of any kind to any persons or entity arising from or related to this information.
