- Based on recent estimates from the Bureau of Economic Analysis, U.S. economic growth slowed sharply in Q4, largely due to the government shutdown, with real GDP rising 1.4% annualized versus 4.4% in Q3, though improving manufacturing activity suggests a potential rebound in Q1 2026.
- Global growth is expected to remain broadly steady in 2026, with the International Monetary Fund estimating growth of 3.3%. The U.S. continues to maintain a relative growth advantage versus most developed peers due to fiscal support, resilient domestic demand, and ongoing investment in productivity‑enhancing technologies.
- U.S. equities softened in February as the technology rally cooled and leadership broadened. The Nasdaq 100 fell roughly 2.3% and the S&P 500 declined about 0.8%, while the Dow Jones Industrial Average finished with a modest 0.3% gain. Sector rotation favored energy, materials, and consumer staples over technology.
- International equities posted gains in February, with emerging markets (+5.5%) outperforming developed markets (+4.6%), supported by strength across Asia and commodity‑focused economies.
- The labor market showed early signs of stabilization in January, with nonfarm payrolls rising by 130,000 and the unemployment rate holding at 4.3%. Job gains were concentrated in health care, social assistance, and construction, while benchmark revisions to prior months underscored weak job growth throughout 2025.
- Consumer confidence remained fragile in February, with the University of Michigan sentiment index little changed at 56.6 as elevated prices continued to weigh on household finances, even as inflation expectations showed modest improvement with one‑year expectations falling to 3.4%, the lowest level since January 2025.
- Financial conditions eased early in the month but tightened into month‑end, as U.S. Treasury yields fell to multi‑month lows amid a flight‑to‑quality and expectations that the Federal Reserve would remain on hold after January’s rate pause, while credit spreads widened and volatility rose as geopolitical risk and inflation uncertainty resurfaced.
- The Supreme Court curtailed the President’s authority to impose broad tariffs, prompting the administration to adopt a temporary tariff framework. A global surcharge was introduced at 10% and could rise to 15%, a strategy President Trump defended in his State of the Union address while signaling that he could find ways to implement tariffs without further congressional approval.
- Geopolitical risk escalated late in February as U.S. and Israeli forces launched strikes on Iranian military targets beginning February 28th. Iranian state media later confirmed the death of the country’s leader, Ayatollah Ali Khamenei, in the attacks.
- Markets initially absorbed the headlines, but risk off pricing intensified as the conflict broadened. Oil prices surged, gold strengthened, and global equities moved lower. Treasury yields also rose as investors repriced inflation risk tied to energy disruption.
- Base‑case expectations assume the conflict may stabilize within weeks with limited long‑term economic impact, but prolonged or broadened hostilities have historically played out with past conflicts in the Middle East region.
- With volatility likely to continue in coming months or even years, the best defense is typically a portfolio well-diversified across geographies, sectors, and themes with a healthy mix of inflation-sensitive and defensive assets.
