February Market Review

February market review

The mostly flat surface of the
S&P 500 through February belied turbulence underneath. AI-driven disruption
fears in areas such as software contributed to volatility as investors
effectively played whack-a-mole across sectors perceived as vulnerable.

The markets rotated away from the
mega-cap tech stocks that have been largely responsible for the domestic equity
market’s intense growth for the past three years despite the average stock
lagging. These “average stocks” now stand to gain both visibility and room to
grow, helping offset contractions elsewhere in the market and rewarding
diversification, although tech stocks aren’t going away any time soon, either.

“The year’s strongest momentum was
coming from unloved corners of the market,” Raymond James Chief Investment
Officer Larry Adam said, pointing out that the energy and consumer staples
sectors had surged to all-time highs while the recent leaders lagged.

The market shows signs of anticipating two possible cuts to the
federal funds rate in 2026, although this would likely not take place until the
end of the year and we expect only one cut, not two. The Supreme Court struck
down President Trump’s IEEPA tariffs, which were promptly replaced by a
sweeping 10% tariff under the 1974 Trade Act as some companies prepare to sue
for refunds.

The bottom line
Despite the markets being internally volatile in February, the
performance of many non-tech stocks that were previously overshadowed kept
averages mostly flat, helping diversified, long-term investors minimize
exposure as the momentum of mega-caps slowed. Tariff uncertainties remain a
headline theme for the second straight year.

Pendle Hill Advisors is proud to contribute to the Montgomery
County News with our weekly curated financial news and topics. If you have any
questions about the markets, your financial plan, or anything, please feel free
to reach out to our office for a no cost initial consultation.

Kent Pendleton, AAMS®

Financial Advisor, RJFS

Pendle Hill Advisors LLC

14375 Liberty St, Ste 109 |
Montgomery, TX 77356

T 936-297-8267

Kent.Pendleton@raymondjames.com
| www.raymondjames.com/pendlehilladvisors

Material created by Raymond James for use by its advisors.
Securities offered through Raymond James Financial Services, Inc. Member
FINRA/SIPC. Investment advisory services are offered through Raymond James
Financial Services Advisors, Inc. Pendle Hill Advisors is not registered broker
dealers and is independent of Raymond James Financial Services.

Investing involves risk, and investors may
incur a profit or a loss. All expressions of opinion reflect the judgment of
the Raymond James Chief Investment Officer and are subject to change. There is
no assurance the trends mentioned will continue or that the forecasts discussed
will be realized. Past performance may not be indicative of future results.
Economic and market conditions are subject to change. Diversification does not
guarantee a profit nor protect against loss.