February 2026 Market Commentary

U.S. equity markets suffered a modest pullback in February following a strong start to 2026. The S&P 500 fell 87 basis points, marking the worst month since March of 2025. Meanwhile, the Nasdaq suffered a bigger drawdown falling 3.38%. The Dow held up relatively well, rising 17 basis points. Market volatility rose this month, as investors remained cautious on inflation data, AI uncertainty and escalating geopolitical tensions in the Middle East.

After being the driver for much of the market’s run up last year, weakness in large technology names was a key theme last month. Many mega cap tech names tied to artificial intelligence and other high growth themes saw profit taking as investors began to question whether their valuations had become stretched. As a result, the Nasdaq underperformed and given the heavy weighting of these names, broader indices felt the impact as well. It is important to note that this does not appear to be a broad-based deterioration in the economy, but rather a market rotation into more safety.

With this market rotation, energy and defense stocks saw capital inflows due to the growing conflict in the Middle East. Energy benefited from rising oil prices while select industrial and defensive companies attracted investors looking for stability. Hotter than expected inflation data towards the end of the month added more pressure on growth stocks. This pushed back the previously anticipated timing of the Federal Reserve rate cuts. While the economy remains stable with steady employment and moderate growth, the market reaction to the inflation data displays how closely investors are still watching inflationary trends.

In closing, February reminded us that markets don’t move in a straight line. Even with this month’s increased volatility, sector rotations could prove healthy in the long run. Especially when major indices like the S&P remain top heavy with mega cap tech names accounting for such a large percentage of the total weighting. Corporate earnings largely remain solid, balance sheets are generally healthy and economic activity continues to expand at a reasonable pace. As we enter March, we remain focused on actively managing our portfolios to balance risk and opportunity amid this market volatility.

If you’d like perspective on your current investment strategy in today’s market environment, we invite you to schedule a conversation with our team HERE or give us a call at (646) 854-2995

Written by members of SAM’s Investment Team on 3/2/2026