06 Mar 2026
February was a reminder that while markets can sometimes appear calm on the surface, under the bonnet they can undergo significant shifts. At first glance, global developed market equity performance appeared relatively stable over the month, with global equity markets continuing to trend upward.
Investment
Monthly Market Outlook
February was a reminder that while markets can sometimes appear calm on the surface, under the bonnet they can undergo significant shifts.
At first glance, global developed market equity performance appeared relatively stable over the month, with global equity markets continuing to trend upward.
However, beneath the surface there was significant rotation between sectors, regions and individual companies, driven largely by ongoing developments in artificial intelligence (AI) and the uncertainty of the long-term implications for different business sectors and corporate business models.
This kind of environment – where market leadership shifts time-to-time even as the overall performance of equities remain stable – highlights the value of diversification and a long-term investment approach.
1. What’s really driving markets right now?
AI is reshaping winners and losers
Much like the internet and early computer revolutions, many see AI as potentially rewriting the rules of business and markets. AI’s potential impact has left investors speculating both the opportunities it creates, as well as the risks it poses to established business models.
Over February, we saw this market dynamic in action, which created noticeable AI winners and losers across different sectors:
See this dynamic in action in the graph below, showing year to date sector returns in the global equity market:
Interestingly, the technology sector itself was not immune from this speculation. Companies involved in hardware, semiconductors and infrastructure – which underpin AI development – have generally held up better than businesses whose products may be more directly disrupted by new AI tools.
This helps explain why some market moves this month may have felt out of sync with the broader economic headlines. Often, investors weren’t reacting to overall economic growth or company profit reports – they were recalibrating the long-term risks AI poses to jobs and business models.
Why certain regions have performed differently
These sector trends also help explain differences in regional market performance.
For example, the UK equity market has a relatively high exposure to asset heavy sectors such as Energy, Materials and Utilities. These areas have been in favour amid concerns about AI disruption, which has supported UK equity performance relative to broader global indices.
By contrast, the US and global developed market indices have much larger weightings in technology and software businesses, where performance has been more mixed.
This doesn’t mean one region will always outperform another. Instead, it underlines an important point: regional leadership can and does change over time, often for reasons that aren’t immediately obvious from the headlines.
A globally diversified portfolio helps ensure investors aren’t overly reliant on any single market or theme.
Why markets haven’t felt more volatile
Despite sharp moves at the stock and sector level, overall market volatility has remained relatively contained, thanks to diversification across the market.
While some parts of the market fell, others have risen, helping balance out overall portfolio performance. This “shock absorber” effect means many investors may not have felt the full impact of the underlying rotations taking place.
Periods of major technological change – like the current AI cycle – are often associated with greater differences in returns between companies and sectors. We expect this pattern to persist, reinforcing the importance of broad diversification rather than trying to predict short-term winners.
2. Geopolitics back in focus
Geopolitical developments remained in focus during the month and into March, particularly in the Middle East and around global trade policy.
Middle East tensions and energy markets
Markets reacted to escalating conflict involving the US, Israel, and Iran, with the main economic implications felt through oil and energy markets. Iran’s strategic influence over key shipping routes means that even limited disruption can push up energy prices, insurance costs, and freight rates. Oil prices rose gradually in February in anticipation of potential conflict and then jumped at the escalation at the end of the month.
Predicting short-term market outcomes in such an environment is extremely difficult. For now, the key points are:
Given that this situation is unfolding, it’s a clear reminder for investors not to get caught up in short-term market swings – keeping a long-term perspective is what ultimately counts.
US tariffs: lots of headlines, limited impact
Investor attention also turned back to tariffs in February, as the US Supreme Court shook up Trump’s trade policy by questioning the legal footing of his tariffs – yet the fallout is far from straightforward.
The US administration has alternative mechanisms available to impose tariffs, and this suggests that the US Supreme Court ruling is likely to have limited overall impact on economic growth, inflation or financial markets.
As a result, while individual countries’ tariffs may see adjustments over time, we don’t expect trade policy developments to materially alter US tariff levels and the broader investment outlook.
3. Earnings season: fundamentals still matter
Company earnings are keeping investors grounded, providing a useful anchor amid the noise of geopolitical developments.
With the majority of US companies now having reported results for the final quarter of 2025, earnings growth has been robust. Profits have grown strongly year on year, supported by solid revenue growth and resilient profit margins.
Importantly, earnings strength has broadened beyond the largest US technology companies. Many smaller businesses and companies outside the tech sector are also delivering healthy profit growth, reflecting a resilient economic backdrop.
Within technology, large companies continue to invest heavily in AI infrastructure, pushing spending plans higher again. Investors, meanwhile, are watching closely to see when – and how – their investment turn into real revenues and profits.
Elsewhere, consumer facing companies report that spending remains healthy, though increasingly driven by higher income households.
Overall, these results reinforce an important message: while share prices can move sharply in the short term, it’s the strength of the underlying businesses that drives returns over the medium- and longer-term.
What this means for investors
February’s market moves offered a clear example of how markets can look calm on the surface while undergoing significant change underneath.
AI will continue to create both opportunities and challenges, producing winners and losers across and within sectors. Geopolitical risks may generate further bouts of volatility, but do not currently change our constructive longer-term investment outlook.
In this environment:
As ever, maintaining a disciplined, diversified approach remains one of the most effective ways to build wealth over time.
Information correct as of 5th March 2026.
Disclaimer
All investment views are presented for information only and are not a personal recommendation to buy or sell. Past performance is not a reliable indicator of future returns, investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.
Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness by atomos. Any expressions of opinion are subject to change without notice.
The value of investments and any income from them can fall and you may get back less than you invested.
The value of investments and any income from them can fall and you may get back less than you invested.
