Investment Commentary | February 2026

February did not show much love to U.S. stock investors. The heartbreak started early in the month, but the S&P 500 started to rebound as Cupid’s big day approached. Ultimately, those early days were just a fleeting rebound as the index closed the month down 0.76%.

Big Tech Struggles Continue

Big tech companies which powered market returns for the last several years have been a drag on returns so far this year. The information technology sector was down 3.91% in February, bringing the year-to-date return to a negative 5.51%. The communication services sector was down 5.14% for the month as well.

Artificial Intelligence Concerns Evolve

The story from big tech continues to revolve around artificial intelligence (AI). However, we have entered a new phase of concerns. To backtrack, the list of concerns has been: the amount of money being spent to develop AI, the ability of AI to be profitable and justify the expense, the circular nature of deals between AI companies, the resource usage and massive expense of data centers to support AI, and finally tech companies borrowing money to fund AI buildout.

Now the concern has turned to the use of AI, and specifically issues pertaining to mass job loss, coupled with the use of AI for mass surveillance and autonomous weapons. In short, there are and have been a lot of concerns. Yet AI keeps being developed at a breakneck pace, with changes in orders of magnitude that few people truly comprehend.

Sector Rotation: Utilities, Energy, and Materials Lead

While big tech is selling off, money is finding its way into smaller market sectors such as Utilities, Energy, and Materials, up 10.35%, 9.43%, and 8.38% respectively. These smaller sectors and the companies within them are dwarfed by the big tech firms. Positive returns in these companies do little to offset the losses in the largest companies in the index.

However, the S&P 500 Equal Weight Index, which gives each company the same weight in the index, has outperformed the market-cap-weighted version handily so far this year.

Mid-Cap and Small-Cap Stocks Provide Relief

Mid-cap and small-cap companies provided a lovely reprieve from their larger peers. The S&P 400 MidCap Index was up 4.12% and the S&P SmallCap 600 was up 2.17% for the month. These markets continue to benefit from the rotation away from the big tech companies.

Strong Performance in International Markets

Foreign markets continued their run with the S&P Developed Ex-US Broad Market Index (BMI) and the S&P Emerging BMI returning 5.69% and 2.65% for the month. Weakness in the dollar, new trade deals, and expanded domestic production combined with lower valuations relative to U.S. markets has led to significant outperformance relative to U.S. large cap over the past 12 months. The Developed BMI returned 42.88% and the Emerging BMI returned 34.36% over the period, while the S&P 500 returned 16.99%.

Bond Market Gains Amid Policy Uncertainty

Fixed income was positive for the month, highlighted by the S&P U.S. Aggregate Bond Index returning 1.30%. While the returns aren’t melting investors’ hearts, any positives from the bond market are welcome.

The newly nominated Federal Reserve Chair, the investigation into Federal Reserve Governor Lisa Cook, the huge decision by the U.S. Supreme Court against the use of the International Economic Emergency Powers Act to set tariffs on foreign countries, and a higher-than-anticipated Personal Consumption Expenditures (PCE) inflation reading are all reasons that bond yields should or could rise, lowering the total returns they provide.

However, all the above, plus the roughly $9 trillion in debt that needs to be refinanced this year, have been reasons for rates to move materially higher.

Rising U.S. Debt and Interest Payments

The interest payment on our debt continues to grow. A significant portion of the $9 trillion to be refinanced was issued at ultra-low rates after the COVID crisis. Rates are higher now, meaning the country’s interest payments are set to increase.

With the annual deficit staying high, tax receipts expected to come in lower due to the Big Beautiful Bill, and uncertainty regarding tariff revenue, pressure on rates remains to the upside.

What Could Push Interest Rates Lower

Among the scenarios that could push longer-term rates down—and total bond returns up—are the potential for military action in Iran or a recession. If rates drop due to military action, the decrease would likely be short-lived. A recession, however, could push rates down for a long period of time.

Precious Metals Shine in February

Diamonds may be a girl’s best friend, but in the month of love, precious metals were an investor’s best friend. The S&P GSCI Precious Metals Index returned 11.78% for the month, bringing the year-to-date total for the first two months up to 21.98%.

These returns have not been without moments of heartbreak. Swings in precious metals of 5%–10% have become almost commonplace, yet the price continues to move upward. Geopolitical tensions spurring central bank buying are likely to continue underpinning the rise in gold prices.

Final Thoughts

Red may be the color of love, but investors prefer green. For diversified investors, February provided a lot of green warming their hearts.

Investment Commentary by Jason Flores, CFA, CAIA – Executive Vice President & Chief Investment Officer at Central Trust Company.

At Central Trust Company, we continue to reassess the rapidly changing investment landscape for both risks and opportunities. If you would like to access our full monthly outlook and additional investment commentary, visit our Investments Learning Center. As always, if you have questions or concerns, please contact your Central Trust Company team. We are always ready to help.