February 2026 Market Commentary

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January and early February were marked by data-driven movements in the stock market, as investors continue to look toward the Fed, job reports, and key inflation indicators to discern the path of rate cuts.

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Rate Cut Probability

With the last few months of 2025 indicating a slowing labor market, analysts predicted a continuation of that trend into January. However, markets were positively surprised by the addition of 130,000 non-farm payrolls in January—the strongest gain in over a year. These gains were largely propelled by strong hiring across healthcare and social-assistance sectors, while white-collar gains were mixed. The report supports the Fed’s inflation-wary hawks, who will likely point to the surprise gain as proof that interest rates have not meaningfully impacted economic activity.

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Inflation Trends

Inflation throughout 2025 persisted above the Fed’s 2% target, even as headline figures began to cool slightly. Consumers continued to face pressure from rising prices on essential goods such as bananas, ground beef, and coffee, which saw some of the steepest increases of the year. The Trump administration responded by implementing targeted tariff exemptions aimed at mitigating these price increases. The inflation picture was further complicated by a government shutdown in the fall, which disrupted the collection of Consumer Price Index (CPI) data. As a result, there was no CPI reading for October, and the November core CPI figure came in at 2.6%, heavily influenced by Black Friday discounts. Economists cautioned that this data likely understated the true level of inflation.

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As a result, traders significantly reduced bets for a 25-basis point cut at the Fed’s March 18 meeting. The probability that the target rate remains unchanged now stands at 90.8%, according to CME’s FedWatch tool. It seems that markets will have to contend with the Fed’s careful wait and see approach for longer, as the FOMC teases out the impact of its October 29th and December 10th 25 bp cuts.

Such an environment will present an early test for Kevin Walsh, President Trump’s appointee as the next Fed Chair. Current Chair Jerome Powell’s term ends in May 2026, with the new Fed chair potentially in place for the FOMC’s June meeting. With the Trump administration’s pursuit of rate cuts, markets are caught between a potentially weakening labor market and the risk that a Trump-appointed Fed Chair cuts rates too early—before the economy has time to work off persistent inflation.

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AI-Disruption Crash

Concerns about a potential bubble in AI‑linked equities have led to a broad sell‑off across both AI infrastructure/hyperscaler names and the software companies supposedly at risk of disruption. Despite massive investment in AI and continued revenue growth across several major players, markets have grown increasingly skeptical about the timing and scale of AI’s commercial payoff. Investors are simultaneously questioning whether hyperscalers are overspending on data‑center build‑outs and whether enterprise software businesses are at risk of margin compression as AI agents automate traditional workflows. This has created an unusual dynamic: both AI “disruptors” and the alleged “disrupted” are being sold at the same time, often irrespective of strong fundamentals or guidance.

This tension intensified following Anthropic’s release of a Claude plugin automating contract review and compliance analysis, which kickstarted significant declines across software and enterprise‑tech names. Several days later, the release of new AI tax‑automation tools triggered another wave of selling in wealth‑management software. These events reinforced the market’s growing anxiety that AI’s impact could compress traditional licensing models even as investors simultaneously doubt the sustainability of the massive infrastructure spending required to support AI systems. This contradiction has contributed to enhanced volatility.

Seen through this lens, the recent volatility represents the collision of two conflicting narratives:

- Narrative 1: AI is powerful enough to meaningfully disrupt software economics by automating legal, coding, and enterprise workflows.

- Narrative 2: AI infrastructure spending is excessive and potentially unjustified, particularly as newer, more efficient models reduce the cost of training and investors demand immediate ROI.

Through our research at the Vera Planning Private Wealth Group we have come to this insight - These two fears cannot both be true. If AI is strong enough to erode traditional software models, then demand for the chips and data centers powering that automation should be structurally higher—not lower. Conversely, if infrastructure spending is a bubble, then traditional software companies are more resilient than current pricing suggests. This internal contradiction has amplified market swings, with both disruptors and disrupted companies being sold indiscriminately.

In contrast, the stocks that have outperformed over the past several months are those tied to real, non‑digital products with durable, observable demand. Gains have been concentrated in homebuilders and building‑products companies, as well as more defensive sectors such as utilities, consumer staples, and healthcare. Energy has also rallied despite softer crude prices, supported by strong fundamentals and sector‑specific tailwinds.

Homebuilder equities, for example, have benefited from declining mortgage rates, the seasonal pickup ahead of the spring building cycle, and the Trump administration’s renewed emphasis on affordable housing. Meanwhile, major oil and gas producers have seen inflows from investors rotating out of AI‑exposed technology names. Additional support has come from U.S. policy developments involving Venezuela, alongside operational efficiency gains and record production levels that have translated into robust earnings.

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Metal Mania

Precious metals have experienced extreme volatility this year as investors flocked to safe‑haven assets amid fears of an AI‑driven market bubble, broader macro uncertainty, and the potential for abrupt policy shifts. That demand pushed both gold and silver sharply higher through January. Silver surged to a record $117.75/oz, up from $71/oz at the end of 2025 and $30/oz at the end of 2024. Gold followed a similar trajectory, reaching a peak of $5,340/oz in January compared with $4,341/oz at year‑end 2025 and $2,641/oz a year earlier.

By late January, however, speculation had begun to dominate trading. On January 30th, a perfect storm triggered a violent reversal. The announcement of Kevin Walsh as the incoming Fed Chair, combined with high‑frequency traders rapidly unwinding leveraged positions, sparked a surge in volatility. Margin calls cascaded through the system, resulting in a flash crash that sent precious metals tumbling. Gold fell 9% in a single session to $4,895/oz, while silver plunged as much as 35% intraday, ultimately closing at $85/oz, down from $115/oz just hours earlier.Conclusio

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Conclusion

The volatility across precious metals, AI‑exposed equities, and rate‑sensitive sectors underscores a market struggling to find footing amid shifting macro signals. A strong January jobs report sharply reduced expectations for near‑term Fed cuts, reinforcing a “wait‑and‑see” stance just as investors were already digesting the AI‑driven selloff that erased hundreds of billions in market value. The late‑January flash crash in gold and silver further highlighted how quickly crowded trades can unwind when leverage and speculation collide. With uncertainty around the Fed’s path, the transition to a new Chair, and the durability of AI‑linked growth narratives, investors may be increasingly inclined to seek stability in short‑dated Treasuries, Treasury Inflation Protected Securities (TIPS), money‑market instruments, and defensive equity sectors until clearer signals emerge.

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