A Change Is Gonna Come
March 13, 2026
February market performance was non-uniform across asset classes. Domestic equities were characterized by a broad negative sentiment that appeared to be generally related to renewed geopolitical activity. International equities, however, posted strong returns for the month, and these appear more fundamentally grounded than currency driven.1 Bond markets remained stable but, like equities, debt stands to be influenced by ongoing tariff discussions as well as other macro-political activity.
Domestic equities returned -3.86% and -1.30% for the period as tracked by the NASDAQ Composite Index and the S&P 500 Index respectively. While some of this underperformance is driven by cross-border policy shifts, some of it is also driven by sector rotation. Technology stocks experienced new all-time highs in mid-October 2025, and since then there has been a steady rotation out of growth stocks and into value-oriented segments. This has become a bit of a jumping off point for the increasing equity concentration narrative. With the tech sector propping up more than 30% of major indexes2, it was no question where the concentration risk would lie. This sector rotation may allow for some of the downside of taking on that risk to materialize. All said, for many diversified portfolios the drag that domestic equities posted this month is not as harmful as it appears when considered on its own.
In the early part of the month, international equities sold off, seemingly in sympathy, with US markets. Fortunately, a quick rebound sent developed markets on their way to return +5.10% for the month as tracked by the MSCI EAFE Index, and emerging markets to return +7.92% as tracked by the MSCI Emerging Markets Index.3 When removing the effects of currency translations, developed markets returned +4.97% and emerging markets returned +6.93% in February.
Debt markets returned +1.75% as tracked by the Bloomberg U.S. Aggregate Total Return Value Unhedged Index . The Fed will meet again mid-March, but Bloomberg’s World Interest Rate Probability function has investors pricing in a hold in rates until at least mid-September. The interest curve is expected to twist steeper and not necessarily rise together.4 Interest rate changes are supported by inflation data that suggests that inflation is moderating, though not in a straight line. There is some push and pull driving inflationary pressures. Recent housing data shows less housing inflation, goods and services are showing marginally increased inflation, and the volatility in the energy sector renders any assumption as to its direction a fool’s errand.1 Additionally, while it seems unlikely to happen, tariff rebate checks would significantly influence inflation if those went into effect.1 From a duration perspective, this data would support an attractive 2-4 year segment. It offers competitive yields without requiring a large duration bet, providing a balance between stability and income generation. Despite its defensive nature, fixed income is still not immune to the volatility that equities often experience.
Earnings growth remains resilient and is anchoring markets amid the headline volatility.1 If the equity leadership rotation continues it could be difficult for large cap equities to continue to post those double-digit returns seen during 2025. With this in mind, it will be interesting to see how the S&P 500 will reconstitute in early summer. International equities appear to be increasingly supported by cash flow even in the ever-evolving macro-political environment. Fixed income is operating in true textbook fashion, but as mentioned there are any number of factors ready to influence its return profile, for better or worse.
Hazel Allen
Portfolio Management Analyst
1https://am.jpmorgan.com/us/en/asset-management/liq/insights/market-insights/guide-to-the-markets/ [Pages in order of citation: 42, 11-13, 21, 11 & 12]
Published February 27, 2026; Accessed March 2, 2026
2https://www.nytimes.com/interactive/2026/02/26/business/stock-market-sp-500-nvidia-tech-bubble-crises.html
Published February 27, 2026; Accessed March 2, 2026
3https://www.spglobal.com/market-intelligence/en/news-insights/articles/2026/1/global-stocks-set-to-rally-again-in-2026-though-us-market-may-regain-lead-97094219
Published January 19, 2026; Accessed March 2, 2026
4https://www.bny.com/investments/no/en/institutional/news-and-insights/articles/the-us-dollar-from-privilege-to-pressure.html
Published February 24, 2026; Accessed March 2, 2026
The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
The MSCI Emerging Markets Index consists of 23 economies including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. The MSCI is a float-adjusted market capitalization index.
Bloomberg’s U.S. Aggregate Total Return Value Unhedged Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS(agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg's World Interest Rate Probability (WIRP) function is a chart that shows the probability of different interest rates for the US benchmark rate. The chart is based on interest rate caps and floors, as well as options on Treasury futures.
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