February 28, 2026
February 2026 Market Commentary
US Equities continued to be range-bound for the month. Since January 1st the S&P500 has moved sideways, stuck in a range from 6800 to 7000. Fears over the valuations of AI stocks continue to grow, introducing downward pressure on stocks in the near-term. Meanwhile, today’s attack by the United States on Iran introduces significant uncertainty, and could have negative repercussions on stock valuations if the war spreads throughout the Middle East and world oil supplies are threatened.
Meanwhile, International Equities continue to advance. The MSCI ACWI (Morgan Stanley Capital Investment All Cap World Index) increased its YTD gains from 2.2% in January to 2.8% by Feb. 27.
Fixed Income has benefitted as capital seeks a “safe haven.” The US 10 Year Treasury saw its yield decline from a peak of 4.28% on Feb 2 to 3.95% on Feb 27. A dramatic decline in one month of 33 basis points. Remember, bond yields move inversely to price. The decline in the 10 Year Yield below 4% helped push mortgage rates below 6% for the first time since 2022.
In the near-term, with uncertainty over AI, and a new war in Iran, caution is warranted. There is no compelling near-term driver to move stocks higher, while at least a minor self-off of 5% is likely in early 2026. International stocks continue to provide the best option in the near-term. In the US, small and mid-cap stocks, as well as dividend-oriented stocks, are more compelling at this juncture vs large cap equities.
January 31, 2026
January 2026 Market Commentary
Markets, both equities and fixed-income, largely moved sideways in January, at least in the United States. The S&P 500 gained 1.4% for the month, and the US Aggregate Fixed Income Market advanced by 0.25%. Concerns grew about near-term valuations for AI stocks, and investors reacted negatively to bellicose comments by the President over Greenland. Once again, things calmed down when the “TACO trade” (Trump always chickens out) became evident again when Allies pushed back against US Territorial ambitions in Greenland during the Davos get together.
Meanwhile, International stocks advanced more rapidly as the US Dollar weakened. The MSCI ACWI (Morgan Stanley Capital All Cap World Index) advanced by 2.2% during the months. Emerging Markets roared ahead with gains over 10%. South Korea advanced by a stunning 24%!
January 2, 2026
December 2025 Market Commentary
Markets continued to be range-bound during the month, with no major moves either upward or downward. Since Summer 2025 market pundits cannot decide whether we are in a bubble, or if AI stocks continue to offer a spectacular investment opportunity. On the surface the economy and corporate earnings appear to be ok for 2026. However, this seems to be predicated on the belief that inflation remains in check, interest rate cuts will continue to come, the job market will hold up, and that high-end consumers, in our “K-shaped economy”, can continue to power consumer spending on their own while the less well to do struggle with inflation, rising health-insurance costs, and an economy that seems to be less friendly to the lower 90%.
The S&P 500 did gain an impressive 16.7% for the year. However, this was mostly due to the “Magnificent Seven” stocks and those counting on future gains from massive AI Investments. The other 493 stocks in the Index could only muster gains in the single digit range. As evidence of this trend, we may observe that RSP, Invesco’s S&P 500 Equal Weight ETF (which holds an equal weighting in each of the 500 stocks), rose by only 9.6% in 2025. Given that a handful of tech stocks (the “Magnificent Seven and AI-oriented stocks noted above) comprise over 40% of the S&P 500 Index (due to it’s market capitalization weighting for all 500 stocks) and are responsible for all of the impressive gains, this indicates that the other 493 stocks in the Index generally only had gains in the low-to-mid-single-digit range, at best. We can therefore conclude that the overall health of US Stocks is less impressive than might appear to be the case on the surface.
Meanwhile, foreign stocks consistently showed much stronger gains in 2025, with much more reasonable valuations and a more compelling near-term investment outlook for the average stock. The MSCI ACWI (Morgan Stanley Capital Investment All Cap World Index) gained an impressive 19.5% in 2025, beating the S&P 500 by over 3% points. Many individual markets beat that number by a healthy margin, such as Korea’s KOSPI Index, which rose by an astounding 76% in 2025.
Despite short-term interest rate cuts in 2025 by the Federal Reserve, mid-to-long-term fixed income yields appear to have bottomed, and are now trending higher, due to significant tax cuts in the USA (which will drive increased US Government Deficits and borrowing going forward). The US 10 Year Treasury bottomed just at or under 4% in April, October, and November, but since November have trended upward once again, ending the year with a yield of 4.17%.
The trend is also evident in yields for the US 30 Year Treasury, now at 4.87%, up from an April low of 4.42% and a November low of 4.54%. Additionally, the spread between 10- & 30-Year Yields has increased to 68 basis points (68 hundredths of 1%) indicating an ever “steepening” of the US Treasury Yield Curve. While consumers and political pundits focus on short-term rate cuts, the market sees problems ahead for inflation, with mid-to-long-term yields heading upward.
In yet another twist, investors also fear that the US Federal Reserve will lose its traditional independence, and a new Fed Chair to be appointed in 2026 will be sure to take orders from the President, resulting in short-term interest rate cuts, but powering inflation over the longer-term. Pending resolution on these issues the near-term outlook is likely for a continued upward-trend in mid-to-long-term fixed income yields. As a result, mortgage rates (pegged to the 10 Year Treasury Yield), auto loans, and other longer-term financing costs, are likely to continue to remain elevated even while the Fed continues to cut short-term rates. The Fed may control short-term rates, but investors control mid-to-long-term yields. The Bond Market therefore appears to signal a more pessimistic outlook as compared to pundits’ outlook for Stocks.
November 29, 2025
November 2025 Market Commentary
Manic markets continued to debate whether we are in a bubble or not, with fears of an AI bubble dominating through the first twenty days of the month, followed by a rebound in positive sentiment as the month ended. For the month the major indices moved sideways, ending near where the month began. News that inflation held steady also helped send stocks higher as the prospects of a December rate cut by the Fed increased.
Mid-and-small cap stocks, as well as dividend-oriented stocks, showed strength during the month, generally increasing by 2-3%.
Bond yields trended upward past mid-month, before declining yields were observed towards month’s end as the job market and consumer spending appeared to weaken, and inflation held steady.
The debate over AI stock valuations may continue for an extended period, leading to potential volatility. No clear direction seems evident. As the year comes to an end the focus will also begin to incorporate the outlook for 2026. Overall sentiment is mixed, with bulls and bears split over the near-term outlook. Perhaps the best factor for 2026 is that markets tend to climb a “wall of worry”. As a result, stocks may move upward, even as the overall economy weakens and valuations for AI stocks continue to be debated.
November 1, 2025
October 2025 Market Commentary
Stocks and fixed income continued to advance in October, although the gains are primarily concentrated in the S&P 500, and especially a handful of tech stocks, powered by continued enthusiasm over AI. Foreign stocks also continue to outperform. The S&P 500 advanced from 6688 to 6840 over the past month, increasing from a YTD gain of 13.7% to 16.3% by Oct. 31. Foreign stocks are doing even better, with a YTD gain for the MSCI ACWI (Morgan Stanley All Cap World Index) going from 16.2% to 18.4% YTD.
Compare these results with Mid-and-Small Caps. Mid-Cap equities show a gain of just 4.2% YTD. Small Caps are even worse, at just 2.2% YTD. Meanwhile, while Large Caps continue to advance, Mid and Small Caps declined by -0.4% and -0.66%, respectively, in October.
Underperformance also plagues the “S&P 493”, referring to the S&P 500 stocks that are not part of the “Magnificent Seven” tech stocks that dominate the index. We can see this by looking at an “equal weighted” S&P 500 index, with each stock having an equal share of the index, rather than a “market weight”, based on market capitalization. As witness of this fact, the Invesco S&P 500 Equal Weight ETF (Ticker RSP) has advanced by 7.25% YTD vs. 16.3% for the entire S&P 500 Index.
Yields on bonds continued a downward trend (indicating higher prices), from 4.15% to 4.08% on Oct. 31, though witnessing a low of 3.95% on Oct. 22. Short term yields also have trended lower, and the Federal Reserve cut the Fed Funds Rate by a quarter point. Despite a lack of official public data, the Fed reasoned that the job market has softened, justifying a quarter point cut even though inflation continues to hold near 3%.
Observers also note that the U.S. Treasury hopes to engineer a reduction of perhaps 30 basis points for the US 10 Year Treasury by mid-2026, by increasingly financing US Deficit Spending through short-term US Treasuries, artificially constraining the supply of longer-term issues. In effect, a hidden form of “Quantitative Easing” and a means of lowering US Government Interest payments, at least in the short-term, by relying on short-term financing. Of course, this may make the deficit even worse in the mid-to-longer-term, but it allows the Government to kick the can down the road for another year or more.
Stocks may continue to advance for the foreseeable future, though many observers are growing increasingly concerned that a bubble is forming. Just a handful of tech stocks (the “Magnificent Seven”) make up over 40% of the S&P 500’s valuation, demonstrating a concentration of value (and risk). Investors with a long-term horizon can probably remain fully invested. But anyone with a short-term orientation, risk-averse investors, and those wanting to put fresh capital to work are advised to make measured investments at these levels.
October 4, 2025
September 2025 Market Commentary
Stocks and fixed income continued to advance in September, at an even faster rate, as the Federal Reserve cut the Fed Funds Rate by a quarter point. The prospect now of several more cuts as we finish the year, and expectations of additional cuts in 2026, resulted in further advances. For the month the S&P 500 increased by nearly 4% pts., from 6,460 on Aug 29 to 6,688 by Sept 30. Yields on the US 10 Year Treasury declined from 4.23% as August ended, falling to 4.03% by mid-month, before climbing back to 4.15% as September ended.
Some observers question whether markets have advanced too far, as they did in the late 90s before the “Dot Bomb Crash” of 2000. Valuations are elevated given enthusiasm over AI. As October began the ADP Jobs Report showed job cuts of 32,000 in September. The US Jobs Report was not published, given the Government Shutdown.
Many believe that corporations have postponed investments and ceased hiring as they absorb the added costs of tariffs. The economy is increasingly driven by the spending of more affluent consumers, while most Americans continue to face stubborn inflation and a softening job market.
Markets follow the credo of “buy the rumor and sell the news.” With the reality of rate cuts now in place, and a potentially softer economy in 2026, the market may run out of steam in the coming months.
Peter Gaylord, CFA
Gaylord Wealth Management, LLC
Rocklin, CA