Monthly review and outlook february 2026

ACD

Monthly Review and Outlook February 2026

Global share markets advanced in February, though performance varied widely across regions. A clear rotation away from large US technology companies influenced returns, as investors questioned how quickly the significant investment in artificial intelligence (AI) will translate into sustainable earnings. Non‑US markets performed strongly, and government bonds generally delivered positive returns and outperformed corporate bonds.

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Below is a review of key developments across global markets and our outlook for the months ahead, highlighting both opportunities and areas to watch.

Company shares

Share markets posted mixed but generally positive returns in February, with notable divergence across regions and investment styles.

United States: US equities edged lower, with the S&P 500 falling 0.8% as investors adopted a more cautious stance after several years of strong growth‑led gains. Concerns over extended valuations in parts of the technology sector encouraged a shift toward companies with steadier earnings and more modest valuations. Defensive areas such as utilities, materials and consumer staples outperformed, while technology, communication services and consumer discretionary lagged. Smaller companies fared notably better, gaining 3.9% as expectations strengthened for improving domestic economic conditions.
Europe: Eurozone shares delivered positive returns. Rising confidence in the region’s economic outlook and the global move away from US technology stocks helped support performance.
Energy, communication services and real estate led the gains, while healthcare and financials underperformed. The European Central Bank kept interest rates unchanged, noting that inflation was “in a good place,” as annual price rises eased to 1.7%.
United Kingdom: UK equities performed strongly in February, supported by global sector rotation. Healthcare, basic materials, utilities and telecommunications all contributed meaningfully to gains. Large‑cap companies outpaced mid‑caps and smaller domestically focused firms. The Bank of England left interest rates at 3.75% but indicated that a reduction could come as early as March. Inflation fell to 3% in January, while economic growth remained subdued.
Japan: Japanese equities rose sharply, with both major indices recording double‑digit gains.
Political stability following the LDP’s landslide election victory supported sentiment, as did expectations of pro‑growth policies. While some technology‑related sectors lagged due to global concerns over AI‑driven disruption, performance was broad‑based across cyclical and domestically focused companies.
Emerging Markets: Emerging markets outperformed developed markets, helped by strong rallies in Korea and Taiwan, where technology hardware companies led gains. South Africa benefited from rising precious‑metal prices and a constructive government budget. Brazil, India and the UAE all gained but lagged the broader EM index, while China continued to face challenges from weak internet and consumer‑focused stocks.

Bonds

Government bond markets generally advanced, with yields falling across major regions. Corporate bonds underperformed as credit spreads widened.

In the US, labour‑market softness and a more cautious mood among investors prompted markets to price in additional potential interest‑rate cuts for 2026. The Supreme Court’s ruling limiting the administration’s tariff powers added a political dimension to market volatility.

Eurozone government bonds benefited from easing inflation, while UK gilt yields declined after the Bank of England adopted a more dovish tone, signalling it may be closer to cutting interest rates.

Japanese government bonds also advanced, helped by expectations of more measured fiscal spending following the recent election.

Commodities

Commodity markets delivered modest gains overall.

Precious metals were volatile early in the month but rebounded after initial weakness.

Energy prices climbed, supported by geopolitical developments, including escalating tensions involving Iran at the end of February.

Outlook

We continue to expect moderate global economic growth over the coming months. Inflation is easing across most regions, though at different speeds, and central banks appear to be moving gradually toward policy normalisation.

We are monitoring two key risks:

Shifts in market leadership, particularly in the US, where returns had been concentrated in a small group of companies. February’s rotation could continue as investors reassess valuation levels.
Geopolitical uncertainty, which remains elevated and may contribute to further volatility across equity and commodity markets.

Overall, we remain constructive on global equities, where a broader set of regions and sectors are now contributing to returns.

We hold a cautious stance on government bonds, as market expectations for interest‑rate cuts may still prove optimistic.

Corporate bonds and commodities, including gold, continue to play an important role in providing diversification within portfolios.

Asset overview

Our general view of assets in the coming months is summarised as follows. These are our in-house views as at the end of February 2025.

Asset	RAG Status	Details
Equities	Green	We continue to hold a positive view on equities as we belief that US recession risks remain low, near-term inflation is contained, and corporate earnings are strong.
Government bonds	Red	We retain a cautious view on government bonds reflecting our view of above consensus growth and fewer Federal Reserve rate cuts than the market expects.
Corporate bonds	Amber	We maintain a neutral stance on corporate bonds.
Commodities	Green	We retain a positive stance on gold as it remains a useful diversifier of portfolios against fiscal and geopolitical risks.

Source: Schroder Investment Management and Schroders Personal Wealth, 9 March 2026.

RAG status legend:

Green - Positive outlook
Red - Negative outlook
Amber - Neutral outlook

Important information

Forecasts of future performance are not a reliable guide to actual results, neither is past performance a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.

Any views expressed are our in-house views as at end-December 2025. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

Schroders Investment Management (SIM) provides investment management and advice services for Lloyds Wealth funds and portfolios respectively.

Lloyds Wealth (ACD) is a trading name of Lloyds Wealth Management (ACD) Limited. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 11722973. Authorised and regulated by the Financial Conduct Authority number 834833. 

Claims may be protected by the Financial Services Compensation Scheme. We are covered by the Financial Ombudsman Service.

Last Updated on 12th March 2026

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