February 2026 Commentary: Rotation Meets Escalation

Summary

• U.S. large-cap stocks declined by 0.8% in February while U.S. small-cap stocks gained 0.8%. U.S. intermediate-term bonds fared well, rising 1.6%.
• Headline inflation eased to 2.4% year over year, as energy and shelter costs moderated and January payrolls exceeded expectations.
• The equal-weight S&P 500 rose 2.9%, outperforming the cap-weighted index, as value stocks and energy, materials, and consumer staples led the market, while technology lagged.
• The technology sector faced concerns over AI-related capital spending along with growing fears that AI agents will materially disrupt traditional software companies.
• A U.S.–Israeli strike in Iran, regional retaliation, and the effective closure of the Strait of Hormuz pushed oil prices up 20% and sent equities lower.

Read and download the commentary here.