February 21, 2026 Market Update

Market Recap: Signs of a Changing Tide

The leading market indexes posted gains last week, but significant changes have been occurring beneath the surface. The shift toward so-called “old economy” stocks has intensified since the start of the year, with traders selling large-cap technology and software stocks in favor of sectors like energy, materials, and industrials.

Meanwhile, bonds have continued to behave more like — well — bonds again. After several years of acting more like stock proxies, fixed income has begun to reestablish its traditional role as a portfolio stabilizer. 

While short-term traders may see things differently, I view these trends as constructive. Broader stock participation is consistent with a healthier, more resilient market, as opposed to a fragile one dependent on a narrow group of mega-cap technology companies.   And when bonds behave more traditionally, they can provide a reliable safety net, ensuring that a dip in tech stocks doesn’t have to mean a dip in an entire portfolio.

Market Performance

Market Commentary:  A Soft Landing Few Expected.  

In 2020, the federal government launched the most aggressive fiscal stimulus in U.S. history in response to the economic shock caused by the Covid pandemic. Trillions of dollars flowed into households, businesses, and state governments. As a result, demand surged, supply chains struggled to keep pace, and by mid-2022 inflation peaked above 9%. 

The Federal Reserve responded with its most rapid series of rate hikes since the early 1980s. Historically, tightening cycles of that magnitude have ended in recession. The central question became whether the Fed could return inflation to its 2% target without breaking the economy.  Most forecasters said no. 

Fast forward to today. Inflation is close to the Fed’s 2.0% target and unemployment remains low at 4.3%. Recent tariff hikes, which were struck down by the Supreme Court on Friday, have been largely absorbed by importers. In short, the Covid-driven contraction so many expected in 2022 has not materialized, and the economy has instead experienced a far softer landing than many anticipated.

While the Court’s decision invalidated the legal ground underpinning the recent tariffs, the administration is likely to pursue alternative authority to reinstate some form of trade restrictions. If that occurs, the Fed’s effort to control inflation without materially slowing growth could become more complicated.

In Case You Missed It: Going for Gold

Norway, a country with a population about the same as Minnesota’s, is leading the Winter Olympics in both total and gold medals. Reminds me of a kid from Omaha, Nebraska who went on to become one of the most successful investors of all time.