February Market Update: Stocks Trade Higher as Market Leadership Broadens

What Happened in the Markets

January was a strong month overall, but the story underneath the headlines was more interesting than the headline numbers.

Stocks moved higher, with the S&P 500 up about 1.5% and reaching a new all-time high.
Smaller companies had a great month, outperforming large companies. This is a sign that investors are feeling more confident about the broader economy—not just a handful of big-name stocks.
Value stocks (more traditional companies) did much better than growth stocks (especially big tech), which actually declined during the month.
Energy stocks were the standout, rising sharply as oil prices jumped nearly 15%.

Not every sector participated. Financials, technology, and health care lagged, but most sectors still beat the overall market, which is a healthy sign.

Bonds and International Markets

Bond prices were mostly flat, even though interest rates moved higher. Corporate bonds held up better than government bonds.
International stocks outperformed U.S. stocks, helped by a weaker U.S. dollar. Emerging markets, in particular, had a very strong month.

The Economy: Strong Data, Weak Feelings

One of the biggest themes right now is a disconnect between how people feel and what the data shows.

Actual economic activity—things like consumer spending and production—remains solid.
At the same time, consumer confidence is low, as people worry about inflation, job security, and global events.

This gap between sentiment and behavior has been showing up for over a year. People may say they feel pessimistic, but they’re still spending and working, which continues to support economic growth.

Interest Rates and the Federal Reserve

Interest rates moved higher in January as investors adjusted expectations around Federal Reserve policy.

The Fed paused interest rate cuts, holding rates steady after cutting three times late last year.
The economy and job market look stable enough that the Fed doesn’t feel pressure to rush into more cuts.
While hiring has slowed, there are no signs of widespread layoffs, which suggests the economy remains on solid footing.

The Fed has taken a “wait and see” approach, and markets currently expect the next rate cut around June.

A Big Shift Beneath the Surface

Two important trends stood out this month:

1. The Market Is No Longer Just About Big Tech

For a while, a small group of large technology companies has been driving most of the market’s gains. That changed in January.

The average stock outperformed the index.
Smaller companies and value stocks significantly outpaced large growth stocks.

This shift suggests investors are branching out into a wider range of companies—especially those that benefit from a steady economy and more reasonable valuations.

2. Commodities Made a Big Move

Gold and silver surged to new highs, and oil prices climbed sharply.
Investors are using commodities as a hedge against uncertainty, geopolitical tensions, and a weaker dollar.

As a result, Energy and Materials were the top-performing sectors.

Why This Matters

January’s market action is a great reminder of the value of diversification. When leadership shifts—from big tech to smaller companies, or from stocks to commodities—having a well-balanced portfolio helps smooth the ride and avoid overreliance on any single trend.

As always, market leadership changes over time, but a disciplined, diversified approach remains one of the most effective ways to manage risk and capture long-term growth.

Important Disclosures

This commentary is provided for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. The views expressed are based on current market conditions and are subject to change without notice.

Any forward-looking statements reflect expectations as of the date of this publication and involve risks and uncertainties. Actual results may differ materially due to changes in market conditions, economic factors, interest rates, inflation, government policy, or other unforeseen events.

Past performance is not indicative of future results. Market returns can vary significantly from year to year, and investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in all market environments.

References to specific asset classes, sectors, or investment themes are for illustrative purposes only and do not constitute a recommendation to buy or sell any security. Diversification does not ensure a profit or protect against losses during market declines.

Interest rate changes, inflation trends, and economic conditions can affect both equity and fixed-income investments. Bond values may fluctuate as interest rates change, and corporate bonds carry credit risk related to the financial health of the issuing company.

This material should not be relied upon as a sole basis for making investment decisions. Investors should consider their individual goals, risk tolerance, and financial circumstances and consult with their financial advisor before making any investment decisions.

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