Markets Unwrapped: February 2026
February delivered a mixed month across global markets as investors continued to navigate persistent inflation trends, shifting interest rate expectations, and rising geopolitical uncertainty.
In the United States, inflation was unexpectedly high at around 2%, limiting the likelihood of further near-term rate cuts. While the Federal Reserve has maintained a cautious tone, investors still expect the next phase of rate reductions to occur later in 2026. Global equity markets remained resilient, with European markets posting minor gains, whilst Asia and the U.S. posting a minor loss through February, supported by steady earnings aligning with expectations.
In domestic markets, the Reserve Bank of Australia lifted the cash rate by 25 basis points as higher than anticipated inflation and a still-tight labour market continued to influence policy direction. Markets now expect potential further rate hikes in May and beyond, though the final path remains dependent on incoming economic data and inflation progress. Australian investors responded by increasing allocations toward domestic government bonds, which remain comparatively attractive given the anticipated rate cutting cycles in other developed economies.
Looking toward the months ahead, geopolitical tensions between the US and the Middle East are likely to contribute to short-term market volatility. Whilst there is significant uncertainties of the impact of this conflict on markets globally long-term, the oil and mining industries are benefiting considerably in the short-term, whilst investors become more conservative in broader sectors of the market worldwide.
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