Monthly Market Insights February 2026
Greetings Team,
If January was the snow globe being shaken, February was the month the glass cracked just a little. The headlines didn’t let up - trade tariffs went from threat to reality with even the Supreme Court weighing in, the new presumptive Fed chair faced his first test, and the "Magnificent Seven" narrative officially splintered. Yet, beneath the surface volatility, the market's ability to digest uncertainty remains intact. The rotation we spotted in January isn't just continuing; it's accelerating. The big question this month shifted from "Why isn't the market selling off?" to "Where is the new leadership coming from?" As the dollar continued its subtle descent and the AI trade matured, capital rotated aggressively into overlooked corners of the market. The political drama is no longer just noise; it’s becoming a catalyst for sector dispersion.
February Market Performance & Rotation
February didn't offer the straight-line momentum of January. Instead, we saw breadth. While the headline indices took a breather, the "average" stock found its footing. Small caps, mid-caps, and value sectors that had been left for dead suddenly woke up. The "tax and tariff" agenda is now priced in, and investors are playing offense in areas that benefit from a weaker dollar and domestic manufacturing.
📉 S&P 500: 6,910.15 (-0.42% MoM)
📈 S&P 500 Equal Weight: 8,290.64 (+3.37% MoM)
📉 NASDAQ: 23,290.09 (-0.73% MoM)
📈 DOW: 49,279.61 (+0.79% MoM)
📈 Russell 2000: 2,410.88 (+3.10% MoM)
(Note: The shift in leadership is evident—the Dow and Russell held gains while tech-heavy averages cooled. This is particularly noticeable when comparing the Equal Weight to the Cap Weighted SP500, the “average stock” made significant gains on “big tech”.)
Key 2026 Themes: Tariffs Take Center Stage
Trade & Tariffs:
February was the month the tariff talk turned into action. The policy backdrop shifted even further after the U.S. Supreme Court’s Feb. 20 ruling striking down the administration’s IEEPA‑based global tariffs as unconstitutional - a decision that immediately halted duty collections and injected a fresh dose of uncertainty into trade policy. Although the Court reaffirmed that only Congress can impose broad‑based tariffs, the White House responded within hours by announcing new global surcharges under alternative statutory authorities, keeping markets on alert as companies reassess sourcing, pricing, and inventory strategies. Targeted tariffs on specific supply chains (steel, pharmaceuticals, EVs) went into effect, and unlike the saber-rattling of previous years, markets are now adjusting to real friction. The immediate impact? Domestic producers rallied, while multinationals with complex supply chains felt the pinch. The weakening dollar we noted in January is acting as a shock absorber here, cushioning the blow for U.S. exports and multinational earnings translation.
Tax Cuts in Practice
We are now seeing the tax refund data roll in. As predicted, the top brackets are seeing larger checks and luxury goods, travel, and high-end services are holding up well. Middle income earners are also seeing larger tax refunds, helping to ease the blow of recent inflation. However, the "vibe-cession" for lower-income households persists. This two-speed consumer is a dynamic we’re watching closely as credit card debt levels continue to remain near the highest of all-time.
The Warsh Era Begins (Sort Of)
The confirmation process for Kevin Warsh moved swiftly this month. With Powell’s term ending in May, Warsh has effectively become the "shadow Chair," and markets are front running his tenure. His first semi-annual testimony to Congress this month was a masterclass in steady leadership. He reiterated support for lower rates, citing the non-recessionary cut environment, but signaled a hawkish watch on inflation if tariffs prove sticky. The market’s takeaway? The Fed is in safe hands, but the "Fed put" now comes with a slightly higher strike price.
Tech Digestion & The SpaceX Factor
The NASDAQ’s slight pullback masks a healthy digestion of gains. The AI trade saw sectors take turns being sent through the wringer. First up were semiconductors which then morphed into an attack software and support infrastructure. More importantly, speculation around the SpaceX IPO reached a fever pitch this month. With the company’s valuation discussions intensifying, the prospect of the most anticipated public offering in a decade is beginning to have a halo effect on the entire aerospace, defense, and industrial tech sectors. It’s not just about AI chips anymore - it’s about hard tech, engineering, and the commercialization of space.
Broader Economic Context & The Passive Risk Reality
The structural shift to passive investing we discussed last month is no longer a theoretical risk- it’s an observable market dynamic. February’s rotation exposed a vulnerability: as money flows blindly into cap-weighted index funds, those funds are forced to sell winners and buy laggards simply to maintain weighting. This has created a "rebalancing drag" but also opportunity. Active managers who can sift through the index noise are finding bargains in small and mid-caps that have been left behind despite having superior fundamentals.
Geopolitical Watch: Greenland & The Arctic The talk about Greenland in January moved from meme to strategy in February. With the Arctic ice corridors opening and rare earth mineral access becoming a national security priority, the administration's interest is now viewed through a strategic lens. Defense spending is no longer just about conflict - it's about resources, infrastructure, and commercial shipping lanes in the great north.
Conflict in the Middle East
They say that which is old becomes new again, and we yet again find unrest in the Middle East. The recent U.S.-Israel military strikes in Iran and the broader escalation around the Strait of Hormuz, one of the world’s most critical oil chokepoints (20-30% of the world’s oil supply transits daily), have triggered a sharp rise in crude oil prices. Elevated oil prices act as a tax on consumers and a cost shock to businesses, pressuring equities through weaker earnings and pressuring bonds through higher inflation expectations and recalibrated monetary policy assumptions. We are closely monitoring the situation and will seek to find opportunity amongst the chaos.
Conclusion & Outlook
February reminded us that bull markets don't die of old age; they rotate. The path forward is less about the single story of U.S. Tech dominance and more about the mosaic of U.S. Reshoring, Defense, and Space exploration. As the mid-term election noise begins to ramp up, expect volatility. But underneath it, the consumer continues to fight to remain employed, the government is spending, and innovation is accelerating.
As we look toward March, we are focused on earnings from the "old economy" sectors that are suddenly new again and watching to see if the February breadth continues to widen. The 250th anniversary celebration is just months away, and the economy is shaping up to put on a show.
Onward & Upward Always!
Steven
STEVEN W. SCHMITT, MBA, CFP®, CPM®, CRPS®, ADPA®
Managing Director
Private Wealth Advisor
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Any opinions are those of Steven Schmitt and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.
The information contained in this commentary does not purport to be a complete description of the securities, markets, or developments referred to in this material.
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Past performance does not guarantee future results.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index.
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