February 2026 Market Commentary

Markets spent February searching for leadership and largely came up empty at the index level. The S&P 500 closed the month at 6,878.88, finishing down approximately 0.9% for February, as gains in select cyclical and defensive areas were offset by continued weakness in Information Technology and software. After several years at the front of the pack, many of the market’s former leaders took a step back as investors reassessed valuation, earnings durability, and the pace of future growth. Software, in particular, came under pressure, reinforcing the idea that even strong long‑term stories are not immune when expectations become stretched.

While U.S. markets marked time, Canada quietly reasserted leadership. The S&P/TSX Composite ended February at 34,340, posting a strong gain of roughly 7.6% for the month. That divergence tells an important story. February felt very much like a tale of two cities, with the U.S. continuing to trade as the world’s growth proxy, while the TSX resumed its more traditional role as a home for real assets, cash flow, and cyclicality. As growth stocks paused, Energy and Materials stepped forward, highlighting the value of diversification across geographies and market structures.

Energy was a key contributor to that strength. Late‑month geopolitical developments involving Iran reintroduced a risk premium into oil markets, pushing crude and refined products higher and reinforcing inflation‑sensitive themes. Oil and gasoline prices moved decisively, reminding investors that geopolitics remains a powerful influence on markets, sector leadership, and sentiment. For Canada, this backdrop played directly into the TSX’s strengths and provided a meaningful counterbalance to U.S. technology‑heavy indices.

On the economic front, the environment remains broadly supportive. U.S. wage growth continues to advance at a measured pace, inflation remains contained, and global policy settings are gradually becoming more accommodative. Fiscal stimulus, particularly in the United States, continues to work through the system, while the prospect of rate cuts provides an additional layer of support. The result is a market that feels unsettled, but not unstable, where rotations are doing the heavy lifting rather than broad market declines.

More importantly, periods like this often create opportunity. Volatility and leadership shifts tend to surface high‑quality companies at more reasonable valuations, particularly when short‑term uncertainty obscures long‑term fundamentals. For disciplined investors, these environments can be constructive, offering the chance to add to resilient businesses with strong balance sheets, durable cash flows, and attractive long‑term prospects at prices that better reflect risk and reward.

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