MARKET RECAP

• US stocks -0.44%, international +0.53%, bonds +0.50%.
• On February 28, 2026, the United States and Israel launched a massive, coordinated military operation against Iran, codenamed Operation Epic Fury by the U.S. and Operation Roaring Lion by Israel. The assault, announced by President Trump via social media, targeted the country’s nuclear program, ballistic missile facilities, and senior leadership.

• Global Market Divergence: American equities are lagging significantly behind international markets so far this year. While the S&P 500 has remained nearly flat with a 0.60% total return, a broad index of non-U.S. stocks has climbed 11.09% over the same period.

• Japanese Market Milestone: Japan’s TOPIX reached a new historic peak this week. Since hitting a relative low in January of last year, the index has beaten the S&P 500 by more than 28 percentage points.
  

• Mortgage Rate Relief: The average 30-year fixed-rate mortgage has dipped under the 6% threshold, marking the lowest level for this borrowing cost since 2022.
  
• NVIDIA Earnings Paradox: NVIDIA reported exceptional growth, specifically noting that its data center compute revenue jumped by more than 50% compared to last year. Despite these strong figures, the stock’s price actually decreased between the market open and close following the announcement—the seventh consecutive time it has followed this post-earnings pattern.

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MARKET RECAP

• US stocks +1.27%, international +1.51%, bonds +0.23%.
• The Supreme Court ruled that Trump’s imposition of tariffs under the IEEPA was illegal. This was clearly the correct decision. The law simply does not allow a President to do whatever he wants in regards to tarriffs. Trump, of course, displayed his worst tendencies and personally attacked the Justices who ruled against his tariffs; he believes they should just support him and forget the law. Most everyone agreed with the decision, and the Justices were following the law. They deserve our respect.
• The advance estimate released this past Friday showed that U.S. GDP grew at an annualized rate of 1.4% in the fourth quarter, a significant slowdown from the 4.4% growth seen in Q3. This cooling was largely attributed to the record 43-day federal government shutdown, which analysts estimate stripped roughly one percentage point from the final growth figure.
• The FOMC minutes released this past Wednesday revealed a surprisingly hawkish shift, with several officials suggesting that interest rate hikes could return to the table if “sticky” inflation remains above the 2% target. While the committee voted 10-2 to hold rates steady at 3.50%–3.75%, the “vast majority” of participants now believe labor market risks have stabilized, allowing the Fed to prioritize fighting persistent price pressures over further rate cuts.
• The U.S. and Iran are currently in a high-stakes “final countdown” toward a new round of nuclear talks scheduled for this Thursday, February 26, in Geneva. President Trump has signaled that he may decide whether to launch limited military strikes within the next 10 days if Iran does not present a substantive proposal to dilute its enriched uranium stockpile and meet “zero-enrichment” demands.

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MARKET RECAP

• US stocks -1.26%, international +1.67%, bonds +0.86%.
• The interest rate on the 10-year treasury dropped by 18 basis points to 4.04%.
• The January jobs report, released this past Wednesday, showed a surprising burst of hiring with 130,000 jobs added, nearly double what most economists expected. Most of the gain was in healthcare stocks. The unemployment rate also ticked down slightly to 4.3%, signaling a potential shift away from the stagnant “low-hire” environment of 2025. Total job growth for last year slashed from 584,000 down to just 181,000.
• The January CPI report released this past Friday showed that inflation slowed more than expected, with the annual rate dropping to 2.4% from 2.7% in December. On a monthly basis, prices ticked up just 0.2%, driven primarily by shelter costs, while being offset by a significant 3.2% drop in gasoline prices.
• The Nasdaq 100 has been moving sideways since October, small caps are in an uptrend, and the Mag 7 is showing some weakness. Money has been rotating into energy, industrials, materials, and staples.
• Dividend stocks have outperformed growth stocks since November.
• Software stocks have been pummeled and are up less than 5% over the last five years.

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MARKET RECAP

• US stocks +1.81%, international +1.69%, bonds +0.31%. The SP500 closed at an all-time high. Small stocks had a really big week, +4.6%.
• 50,000 new jobs were added in December, less than the 70k expectation.  Manufacturing jobs fell for the 8th time in a row. The unemployment rate fell to 4.4%.
• The ISM PMI for manufacturing fell to 47.9 from 48.2. Economists were looking for 48.3. It was the 10th month in a row projecting a contraction in manufacturing activity.
• Economists at the Federal Reserve Bank of San Francisco, looking for at data from 1886 to 2017, found that tariff increases have tended to lower inflation and raise unemployment in the short run. A 1% increase in tariffs lowered inflation by 0.6%. This was due to an “aggregate demand shock.” Tariffs create economic uncertainty and a negative wealth effect (for example, falling stock prices). Because the economy is impacted negatively, unemployment rises.
• GDPNow estimates Q4 growth at a blistering 5.1%.
• Trump issued an executive order placing restrictions on executive pay and stock buybacks for defense contractors “until such time as they are able to produce a superior product, on time and on budget.”

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MARKET RECAP

• US stocks were up by 1.05%, for 2025, +17.10%. International stocks +1.23% and +32.35% for the year. Bonds -0.17% and +7.19% for the year.
• Trump took out Venezuelan Dictator Maduro in a stunning midnight attack. He was a bad guy; the country had fallen deeper and deeper into economic despair, millions had to flee the country and lost everything; he deserved to be removed. He was given opportunities to leave on better terms, but he refused. Now, we determine whether the Administration has a plan and whether it will work.

Markets & Investor Sentiment

• U.S. equity strategists broadly expect continued market gains in 2026, despite elevated valuations, driven by earnings growth expectations and anticipated rate cuts
• Late-December trading volumes were thin due to holidays, amplifying short-term market moves and profit-taking
• Stock Trader Almanac’s Santa Claus rally is measured by the last five-days of the trading year and it ended in the red, with a 0.87% loss. This is one of three indicators that run through the end of January that supposedly gives a signal for the upcoming year. That made it three years in a row, first time since 1950.

Monetary Policy & Rates

• Markets remain focused on Fed guidance for 2026, following multiple rate cuts in late 2025
• Debate continues over the pace and extent of further easing, with inflation risks still monitored closely

Global Economy

• Global growth outlook for 2026 remains cautiously optimistic, led by the U.S. and China, though valuation risk and geopolitical uncertainty persist
• China announced ~$8.9B in consumer stimulus funding for 2026 to support domestic demand (electronics, EVs, appliances)

️ Corporate & Capital Markets

• Private equity exit activity remains constrained; record use of continuation vehicles highlights valuation gaps and slower deal flow
• Analysts flag potential liquidity and pricing stress in private credit and leveraged assets entering 2026

Policy & Fiscal Developments

• U.S. economists highlight material economic impact expected from 2026 tax policy changes, including rate and deduction adjustments, that should help the economy.

⚠️ Key Risks to Watch

• Elevated equity valuations, especially in tech and AI-linked stocks
• Inflation re-acceleration risk impacting Fed policy trajectory
• Geopolitical tensions and private-market valuation pressures

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