Last Friday, the US Supreme Court ruled that the International Emergency Economic Powers Act did not give the President the authority to impose tariffs, providing a lift to global equities. However, President Trump swiftly responded by announcing his intention to apply a 15% global tariff, sending the dollar lower and gold higher as markets moved to price in renewed trade uncertainty.
In fixed income, hotter-than-expected inflation data pushed Treasury yields higher. Looking ahead, Nvidia’s results and forward guidance will be a key focus for investors.
Market recap
Beyond the numbers
Macroeconomics
The American economy continues to exhibit stubborn resilience. Although fourth-quarter gross domestic product (GDP) (1.4% q/q annualised) was weighed down by a federal shutdown that lopped a full percentage point off the headline growth figure, the underlying engine continues to tick over nicely. Final sales to private domestic purchasers grew by a healthy 2.4%, maintaining the steady 2–3% pace seen in recent quarters.
While recent US flash PMI data were broadly underwhelming, they remain consistent with healthy growth. Manufacturing (51.2 vs. 52.4 expected) felt the chill of adverse weather, suffering a dip in orders and output that mirrored a cooling in the services sector (down from 52.7 to 52.3). Beneath the surface, anxiety over exports and hiring has clouded the mood, even as new business remains buoyant. Inflationary pressures, however, refuse to subside entirely. Personal consumption expenditures (PCE) rose by 0.4% m/m (3.0% y/y), driven by price hikes in recreation and food, offering a firmer reading than last week’s consumer price index (CPI) data might have suggested. In a legal shift, the US Supreme Court struck down President Trump’s emergency tariffs, ruling they exceeded the executive’s authority. Trump immediately reacted by invoking a different 1974 statue to impose a temporary 15% global surcharge.
Across the Atlantic, the eurozone’s industrial recovery is finally beginning to find its feet. The February manufacturing flash PMI climbed to 50.8 from 49.5, propelled by a rebound in Germany; this offsets a dip in French sentiment and stable readings elsewhere in the bloc.
The United Kingdom, meanwhile, faces a more contradictory set of signals. A rising composite flash PMI, ticking up from 53.7 to 53.9, suggests accelerating growth, yet the labour market is cooling. Unemployment has crept up to 5.2%, with payroll figures shrinking for the fifth month running. On the price front, headline inflation moderated to 3.0% from 3.4% in line with expectations, but the core reading of 3.1% remains sticky.
This week, the eurozone’s preliminary February inflation data and the US producer price index will take centre stage. Consumer confidence figures from the UK, Germany, and France will also offer insights into economic sentiment across key economies.
Asset allocation: strategic views as at February 2026
Equities
Global equities posted positive gains last week (MSCI ACWI total return: +1.0%) generating modest returns through Thursday and rallying on Friday as the US Supreme Court ruled to overturn the Trump administration’s global tariffs. The decision helped offset weak headline US macro data and stubborn inflation, the continued heightened tensions with Iran, and hawkish Fed meeting minutes that pushed investors to dial back rate-cut expectations.
As the largest trading bloc with the US, European equities rose the most over the week (STOXX Europe 600: +2.2%), followed by those of the US (S&P 500: +1.1%), with the latter primarily driven by strength among the Magnificent 7 group of stocks (+2.3% vs. S&P 500 Equal Weighted: +0.6%).
According to Morgan Stanley*, the latest 13F filings revealed that the group was the most under-owned by institutional investors relative to their weightings in the S&P 500 in 17 years (as at the end of Q4 2025). Their analysis of historical ownership data suggests that, on average, there is a statistically significant correlation between low active ownership relative to the S&P 500 and future share-price performance and that stocks often demonstrate a technical upward pull when active ownership significantly lags behind the market and vice versa.
As the most institutionally under-owned stock among the Magnificent 7 (with an institutional weighting of ~5.2% vs. 7.8% in the S&P 500), Nvidia’s upcoming results and forward guidance will be a key focal point for investors in the week ahead.
Source(s): *Morgan Stanley, report published on Wednesday, 18 February 2026
The S&P 500’s gains were driven primarily by strength among the Magnificent 7.
Fixed income
Fixed income markets displayed resilience amid mixed data and geopolitical tensions, with US Treasuries seeing yields edge higher overall on softer growth signals and hotter-than-expected inflation data. US 10-year Treasury yields rose 3 bps to 4.08%, while the short end climbed 9 bps. In the UK, 10-year gilts fell 6 bps to 4.35%, the lowest level in a month, buoyed by declining inflation (January CPI came in at 3.0%) and a record public sector surplus that bolstered expectations of the Bank of England (BoE) easing interest rates.
Performance for Treasuries, investment grade (IG) and emerging markets (EM) were muted, while high yield (HY) added 0.2%. AT1s ploughed ahead, with a return of 0.4% for the week and are already up 1.6% for the year, as spreads have breached all-time lows driven by investor confidence.
Private credit was in the spotlight. The asset manager Blue Owl Capital permanently halted redemptions from a semi-liquid retail vehicle (OBDC II). At the same time, Blue Owl highlighted the sale of a portfolio of loans at close to par, although we note the sale represents just 1% of their broader portfolio of pensions and insurance companies. We would expect that Blue Owl selected the best loans to send a message that the rest of the portfolio is healthy and to highlight that Blue Owl’s insurance arm was one of the buyers. Although it is undeniable that the business development company (BDC) space is under pressure, as evidenced by the net asset value (NAV) discount and selling pressure, this particular issue highlights more Blue Owl’s continued management blunders rather than a specific credit event.
Amid mixed data and geopolitical tensions, US 10-year Treasury yields rose to 4.08%.
Forex & Commodities
The USD weakened following the news that US President Trump intends to impose a 15% global tariff. The EUR/USD rose to levels of 1.1835, and the US Dollar Index fell to levels of 97.50. Higher tariffs are likely to raise the prospect of USD–equity correlation breakdowns, resulting in further hedging activity. We note that Q4 US GDP data printed below expectations at 1.4% q/q, showing a weaker profile than markets had anticipated. The coming week is relatively light in terms of US economic data releases. Geopolitical risks in the Middle East should remain paramount, giving further upside risks for gold (see below for more details).
The JPY has stabilised following the recent parliamentary elections, and the main event for the coming week will be the government’s announcement of two new Monetary Policy Committee (MPC) members for the Bank of Japan (BoJ). If Prime Minister Takaichi moves towards more dovish candidates, we can anticipate that the JPY may weaken modestly.
CNY exchange rates have appreciated meaningfully since December, and as the domestic market reopens following the Chinese Lunar New Year celebrations, we can anticipate modest CNY weakness, as is consistent with normal seasonal effects. We believe that any modest weakening pressure is unlikely to be sustained, and we note that state media are giving increasing prominence to the CNY’s appreciation, saying that, ‘the RMB is evolving from a transaction currency to an asset currency’. The International Monetary Fund (IMF) noted that the CNY may be undervalued by between 12.1% and 20.7%, which is consistent with inflation differentials between China and the other major economies since 2020.
Gold rose to highs of USD 5,176 per oz following Trump’s tariff announcements as markets move to price in the return of trade-related uncertainty and the possibility of higher inflation outcomes. Gold had already been on an appreciation streak, given recent events in the Middle East. We maintain a highly constructive stance on gold, and it likely has further upside risks in the coming week given the situation in Iran. Silver also rose to highs of USD 87 per oz, reflecting its high beta to gold. We caution about getting into long silver positions at current levels, given the still extremely high levels of volatility.
Given the situation in Iran, gold likely has further upside risks in the coming week.
The opinions expressed herein are correct as at 23 February 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.
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