U.S. stocks edged down in February, though performance varied beneath the surface. Market breadth continued to improve, as weakness among large-cap stocks weighed on overall index returns while smaller-cap and value stocks performed relatively well. Energy and utility stocks moved higher amid increased infrastructure investment and rising geopolitical tensions involving Iran. On the economic front, January inflation data showed further moderation but remained above the Federal Reserve’s long-term target. Meanwhile, the unemployment rate edged slightly higher, contributing to a more cautious tone among investors. Policy uncertainty lingered after the Supreme Court ruled against the administration’s implementation of tariffs, leaving the future direction of trade policy unclear.
International stocks surged during the month, with many developed and emerging markets posting strong gains. The European Central Bank held interest rates steady as economic indicators across the euro area showed signs of improvement and inflation pressures moderated. Continued strength in semiconductor and export-oriented industries supported international stocks’ climb. In Japan, stocks rallied following the appointment of a new prime minister and a decisive election outcome, reducing political uncertainty, and raising expectations for increased fiscal spending.
Bonds posted strong gains in February as yields declined across the curve, with the 10-year Treasury yield falling below 4%. Moderating inflation data and signs of softening economic momentum reinforced expectations that monetary policy may gradually ease over time.
At the end of February, the U.S. and Israel carried out military strikes against Iran. As March began, markets experienced increased volatility as tensions in the Middle East escalated. Investors are assessing the potential implications for inflation, as well as the outlook for labor markets and central bank policy. We expect some near-term market choppiness as geopolitical developments evolve and will continue monitoring portfolios closely.
Source: Morningstar, Inc.
Disclosure: There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this market commentary serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Investment Advisers, LLC. This information was gathered from reliable sources, but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated. Raffa actively leverages Artificial Intelligence and Large Language Models within our operations. The use of such technologies, focusing on the safeguard of non-public personal information, protecting of trade secrets, verification of information accuracy, and other pertinent compliance considerations, is outlined in Raffa’s Compliance Manual and acknowledged by Raffa staff. All viewpoints and final content created was reviewed and approved by the Raffa team to verify accuracy, perspective, and compliance with our marketing guidelines.
February 2026 Market Commentary & Outlook
Market Commentary
U.S. stocks edged down in February, though performance varied beneath the surface. Market breadth continued to improve, as weakness among large-cap stocks weighed on overall index returns while smaller-cap and value stocks performed relatively well. Energy and utility stocks moved higher amid increased infrastructure investment and rising geopolitical tensions involving Iran. On the economic front, January inflation data showed further moderation but remained above the Federal Reserve’s long-term target. Meanwhile, the unemployment rate edged slightly higher, contributing to a more cautious tone among investors. Policy uncertainty lingered after the Supreme Court ruled against the administration’s implementation of tariffs, leaving the future direction of trade policy unclear.
International stocks surged during the month, with many developed and emerging markets posting strong gains. The European Central Bank held interest rates steady as economic indicators across the euro area showed signs of improvement and inflation pressures moderated. Continued strength in semiconductor and export-oriented industries supported international stocks’ climb. In Japan, stocks rallied following the appointment of a new prime minister and a decisive election outcome, reducing political uncertainty, and raising expectations for increased fiscal spending.
Bonds posted strong gains in February as yields declined across the curve, with the 10-year Treasury yield falling below 4%. Moderating inflation data and signs of softening economic momentum reinforced expectations that monetary policy may gradually ease over time.
At the end of February, the U.S. and Israel carried out military strikes against Iran. As March began, markets experienced increased volatility as tensions in the Middle East escalated. Investors are assessing the potential implications for inflation, as well as the outlook for labor markets and central bank policy. We expect some near-term market choppiness as geopolitical developments evolve and will continue monitoring portfolios closely.
Source: Morningstar, Inc.
Disclosure: There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this market commentary serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Investment Advisers, LLC. This information was gathered from reliable sources, but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated. Raffa actively leverages Artificial Intelligence and Large Language Models within our operations. The use of such technologies, focusing on the safeguard of non-public personal information, protecting of trade secrets, verification of information accuracy, and other pertinent compliance considerations, is outlined in Raffa’s Compliance Manual and acknowledged by Raffa staff. All viewpoints and final content created was reviewed and approved by the Raffa team to verify accuracy, perspective, and compliance with our marketing guidelines.