March 6, 2026

The S&P 500 fell almost -1% in February, giving back most of January’s gains, as markets continue to reassess the elevated expectations surrounding the AI trade. After a powerful rally led primarily by large technology companies, investors have begun rotating into industrials, energy, and other value-oriented sectors, broadening market participation but also creating short-term pressure on the major indexes.

Markets also tend to react negatively to uncertainty, and February provided several examples. A recent U.S. Supreme Court ruling regarding tariffs was followed by new executive orders implementing additional tariffs, which introduces further ambiguity for global trade policy. When businesses cannot clearly anticipate the rules governing international trade, it becomes more difficult for them to plan investments, manage supply chains, or forecast costs.

At the same time, ongoing geopolitical tensions and conflicts around the world continue to add another layer of unpredictability. When firms operate in environments with stable tax policies, predictable supply chains, and consistent consumer demand, analysts can estimate corporate earnings with a higher degree of confidence. Today, however, many of those variables remain fluid. As a result, investors should expect periods of increased volatility as markets continually adjust expectations for future corporate profits.

While short-term uncertainty can create choppy markets, it is also important to remember that volatility is a normal and healthy feature of long-term investing. Market pullbacks and rotations often reflect investors digesting new information and repositioning capital, rather than signaling a fundamental breakdown in economic growth. Periods like this remind us why a disciplined, long-term approach to investing remains so important.

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