Monthly Commentary: February 2026

The performance of global stock markets in February was mixed but generally resilient, as
investors grappled with geopolitical risks, macroeconomic developments and changes in
sentiment towards different business sectors. In broad terms, equities (company shares) rose, led by Japanese and other Asian markets, where decisive political outcomes and strong local demand lifted stocks. European and emerging market stocks also posted respectable gains.

Meanwhile, major US stock markets showed more modest returns amid tariff uncertainty and concerns about the valuations of artificial intelligence (AI) related companies.
Commodities were a standout winner. Gold and other precious metals continued to attract
flows from investors seeking a ‘safe haven’, as geopolitical tensions escalated. Meanwhile, oil’s sensitivity to Middle East developments kept energy prices volatile and elevated.

Technology and high-growth shares faced headwinds, as investors moved into value-oriented and ‘real assets’ such as property and infrastructure. There was relative stability among companies with more defensive qualities, such as utilities, and certain stocks more exposed to the economic cycle.

These developments underlined the benefits of diversified equity exposure in a
multi-asset portfolio.  Government bonds were mostly positive as yields3 (which move in the opposite direction to bond prices) fell amid demand from investors seeking refuge because of concerns about AI valuations and rising Middle East tensions. In currency markets, the US dollar was stronger against some developed nation currencies, but weaker versus a number of emerging market currencies. This was because growth is stronger in some of these developing countries and interest rates and bond yields are more attractive. As an investment team, we are watching the situation in the Middle East very closely.

This includes monitoring the oil price for a large and sustained increase that could drive up inflation. As events continue to unfold, we will remain sharply focused on latest developments and their implications for our investors. It is worth mentioning that one of the benefits of multi-asset investing is that it provides diversification designed to help manage risk and smooth returns during periods of geopolitical uncertainty.

UK

The FTSE 100 gained 7.0% in February, supported by strong performance across sectors such as energy, healthcare and basic materials. The last of these includes industrial metals, which have seen strong global demand as investment in AI-related data centre infrastructure accelerates. Healthcare outperformed thanks to the sector’s defensive characteristics, attracting investors during a period of heightened geopolitical uncertainty. Rising oil prices provided a boost for energy stocks.

UK headline inflation eased to 3.0% in January, down from 3.4% in December. Although broadly in line with expectations, the figure remained above the forecast from the Bank of England (BoE). The main reason for the fall was a sharper‐than‐expected reduction in food inflation. While inflation remains above the BoE’s 2% target, easing pressure on prices is welcome news for policymakers and investors.

Europe

The MSCI Europe stock market index (excluding the UK) rose 4.9%, supported by strong
performance across the oil & gas and basic materials sectors for the reasons outlined above. European inflation continued its downward trajectory, with January’s rate easing to 1.7%. Monetary policy remained steady, with the European Central Bank (ECB) maintaining its benchmark interest rate at 2.0%. This stable policy backdrop, combined with easing price pressures, continued to shape market expectations for the region.

US

US technology stocks experienced a broad sell off in February, with the S&P 500 index recording its weakest monthly performance since March 2025. Evidence of changing investor sentiment towards the AI theme was provided when chip giant Nvidia reported stellar earnings, only for its shares to fall the following day.
US inflation eased from 2.7% in December to 2.4% in January, which was slightly below the widely expected figure of 2.5%. US economic growth (as measured by gross domestic product or GDP) slowed to an annualised 1.4% in the final quarter of 2025. This was a sharp deceleration from the 4.4% growth seen in the third quarter and significantly below the widely expected 3%.

Japan

Japanese equities extended their strong start to 2026, with the MSCI Japan index rising solidly in February. This was the result of broad‐based gains across the financial and industrial sectors and among other companies whose fortunes tend to be tied to the economic cycle (often called ‘cyclicals’). Increased risk appetite among global investors helped sustain the gains by Japanese equities, which remain underpinned by attractive valuations, robust earnings and continuing corporate reforms.
A key feature of the month was the increased investor interest in cyclicals, particularly industrial businesses and less highly valued financial sector stocks. Investors responded positively to indications of recovering global manufacturing activity and improving export demand, which benefited companies linked to capital goods (such as machinery and factory equipment).

Other beneficiaries were businesses involved in automation and energy‐related supply chains. Technology stocks also performed well, especially those in semiconductor‐related areas, as investors priced in a further increase in AI‐related investment.
After the general election result, markets broadly expect continuity in economic policy and reform efforts, helping to limit uncertainty and supporting risk appetite. The Bank of Japan remained cautious, while reiterating its willingness to raise interest rates if wage increases justify it.

Asia Pacific

Asia-Pacific (excluding Japan) equities rose strongly during the month, extending January’s positive momentum amid improving risk appetite among global investors and a broadening recovery in cyclical sectors. Expectations that major developed market central banks may cut interest rates again later in 2026 helped reinforce appetite for risk assets, such as equities, while resilient company earnings across several key Asian markets further strengthened sentiment. Australia and Southeast Asia posted broadly positive returns.

Emerging Markets

Emerging market equities rose again in February, with the MSCI Emerging Markets index posting another month of solid gains, supported by resilient global growth indicators and continued anticipation of further rate cuts in developed markets. The strongest performance was from technology companies, with Korea and Taiwan standout performers, continuing the powerful rally seen in January. India and Indonesia were weaker, partly due to investors continuing to take their profits from previous stock market gains.


Performance of key Global Markets

China saw only a modest improvement, with property-sector fragility and subdued consumer demand limiting stock market progress, despite pockets of strength among export-oriented industrial companies. Latin America was led by Brazil, which delivered another month of healthy gains, supported by strong commodity prices and stabilising inflation. Mexico also performed well, benefiting from a balanced macroeconomic backdrop and US companies ‘nearshoring’ by moving their overseas production sites from further afield to a neighbouring country.

Fixed Income

In February, government bonds benefited as investors continued to seek ‘safe havens’. Yields on US government 10-year bonds fell from around 4.25% to below 4.0%. This was as investors sought safety amid concerns about the huge sums being invested in AI infrastructure, worries about weak labour market data and later in the month uncertainty about new conflict in the Middle East.

Differences in central banks’ policies continued. The ECB was still taking a ‘wait and see’ approach, while the BoE seemed to have shifted to a position where interest rate cuts looked more likely. Meanwhile, the US Federal Reserve acknowledged vulnerabilities in markets. Politics were a significant driver of bond price moves, with economic data taking more of a back seat. The UK and Japan saw notable political events/disruption (calls for UK Prime Minister Keir Starmer to resign as leader of the Labour Party and leadership consolidation of power respectively). The end of the month saw investors becoming more risk averse, which pushed up yields on company bonds.