STOCK MARKET RECAP FEBRUARY 2026

Things have not changed much in the last month. The stock market has basically been flat and the same factors are driving the day-to-day reactions and overreactions.

The chart below shows the price trends for the S&P 500 and the Nasdaq since the end of October 2025.

Prices are basically flat from the end of October until now.  The S&P 500 is almost exactly flat with the highs reached last October and the Nasdaq is down about 4%. We describe this situation as the market being stuck in a trading range. 

In the chart you can also see the large daily price swings. There have been several moves of 2% or more in both directions as the market is searching for a trend.

This flat market follows the huge gains posted from late April through late October last year.  The S&P gained over 30% during that run and the Nasdaq gained over 40% over those six months. The fact that the previous surge has stalled out is not unusual as markets need to pause to digest the huge gains.

The AI/technology trade is one of the factors causing the daily and weekly price swings.  AI capital spending continues to drive the overall economy, but the market is not certain yet about the expected returns on those investments. Recently, the market has been punishing industries expected to be hurt by AI – software companies and some financial services companies.

Unfortunately, the recent news on tariffs means more uncertainty for the market and for companies and for the economy.

Economic data continues to be mixed.  Employment data has been volatile – good one month and bad the next.  Inflation continues to run above the Fed’s goal of 2% but it has been stable.

If job losses accelerate, we can expect some modest rate cutting from the Fed.  Fed cuts will minimize the impact on stock prices from an increase in unemployment.

Corporate earnings growth continues to be strong – above historical averages.  Corporate earnings growth needs to stay above average to sustain the high stock market valuations.  

My stock market valuation gauge indicates that the stock market (S&P 500) is still about 25% above its fair market value.  Short of some news about big productivity increases from AI, it will be difficult for stocks to climb much higher at these valuation levels.

I do not trade based on market valuation levels and you should not either.  It is just a reminder that you need a strategy in place to protect your savings in case we experience a bear market. Older investors in particular need loss protection during stock market downturns.

My investing system comes with built-in loss protection.  It is designed to avoid most of the losses in bear market meltdowns.  But it also produces big gains in bull markets.  You can now invest in my system directly from your brokerage account.  Click on this link to get on my calendar to learn how to start using my Growth and Safety fund.

Meeting

Stay Disciplined My Friends,

Phil

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