Uncertainty increases amid mixed markets and the Iran conflict
In February, equity markets were mixed after a positive January. This performance was impressive considering the onslaught of negative business headlines.

Fixed income markets were also positive by 1.6% in February, as measured by the Bloomberg U.S. Aggregate Bond Index. In 2025, bonds were up a solid 7.3% for the year.

The Iran conflict
As we ended February, there was some choppiness in the equity markets driven by worries of AI-related disruption in certain tech sectors like software. This led to spiraling worries over private credit and equity, especially in software investments.

Market worries are now magnified by the Iran conflict, along with the price of oil at nearly $100 a barrel. The first week of March was negative, and the VIX spiked to the upper twenties and currently stands at 25.7 on March 9. On balance, the market fall was reasonably modest. Trading during the week was orderly.

It is too early to gauge the market impact concerning Iran, but the price of oil will likely remain elevated. As noted below, company earnings have been holding up, and this has helped fuel markets.

Economic data
The Bureau of Labor Statistics (BLS) released the January CPI inflation report on February 13. The report showed that CPI rose by 2.4% year-over-year and was an encouraging number for the markets. The prior month reported a 2.7% year-over-year CPI number. This low CPI number can help support potential rate cuts if the economy were to slow.

The Federal Reserve Board will meet on March 18 and announce its actions on the 19th. The current Fed funds rate now stands at 3.5%–3.75%. Generally, the market expects one or two more cuts in 2026, which will be affected by both CPI rates and strength in the labor markets.

Another successful earnings quarter mostly done
The big driver of the strong markets of the past few years has been earnings growth and whether this growth could be maintained. As a result, this earnings season was in sharp focus and the results were encouraging.

Roughly 73% of companies have reported a positive earnings surprise, driving an aggregate earnings growth rate of 14.2%. This rate is the sixth consecutive quarter of double-digit earnings increases.

On a more cautious note, only 55% of the companies gave positive guidance, which was lower than the prior 70%–80% positive guidance figure. Overall, estimates for earnings growth remain in the 13%–15% range for the full year.

Summary
Our outlook for 2026 continues to be for positive markets, likely in an 8%–12% range of growth. We would also expect volatility to increase along with periodic worries about equity valuations, such as the present software sector concern. Additionally, midterm elections have traditionally added to market volatility and we expect this year to be similar. A new factor has taken focus — the conflict in the Middle East — and we will be monitoring the situation and the effects on markets closely.

Investment opportunities remain across a wide spectrum, and we are broadening into undervalued, underappreciated assets while continuing to expand into private markets. Dividend stocks have been a stand-out and we expect this to continue.

The current market valuation stands at 21.6 times forward earnings. The economy remains in a relatively strong position, and the leading U.S. companies continue to be well-managed, profitable, and innovative, thus supporting our positive long-term outlook.