February 28, 2026 Market Update

Market Recap

AI disruption fears alongside fresh inflation data led to a choppy week on Wall Street.  Select earnings reports and data suggesting the American consumer remains resilient, provided some support.  However, those positives were more than offset by concerns about AI disruption (discussed below) leaving broader indexes struggling to gain sustained traction.

In the bond market, Treasury yields moved lower over the course of the week.  The 10-year Treasury yield drifted down as investors sought relative safety during equity volatility, while short-term yields remained relatively stable as expectations for Federal Reserve policy were largely unchanged.

This week’s action was driven in large measure by investor psychology.  While underlying economic data remains stable, Mr. Market is unlikely to commit to a direction until there is greater clarity on what comes next.

Market Performance

Market Commentary: Shoot First, Ask Questions Later.

We are currently experiencing a fascinating, and at times slightly bizarre, tug-of-war in the stock market.  Instead of reacting primarily to earnings results, investors are reacting to the possibility of AI disruption.  Share prices of companies with healthy balance sheets and stable cash flows have experienced a spike in volatility, driven not by deteriorating fundamentals, but by long-term disruption fears. 

• AI infrastructure stocks, particularly chips and power-related companies, continue to attract buyers, while AI application and software firms have faced heavy selling pressure.

• One of the more unusual catalysts was a viral Substack post titled “The Global Intelligence Crisis.”  It outlined a 2028 scenario in which AI agents replace large portions of white-collar work, potentially pressuring the consumer economy.  Although clearly labeled a scenario rather than a prediction, software stocks lost over $200 billion in market value on Monday.

• Even if a trader doesn't believe AI will kill a specific business next year, they know that other people might believe it. As a result, they are selling now to beat the crowd.

The result has been a K-shaped market so far this year.  Mr. Market has shifted from rewarding AI beneficiaries to aggressively punishing anyone perceived as a potential AI victim.  Traders are so focused on not being caught on the wrong side of the AI story that even speculative commentary is being given the significance usually reserved for Federal Reserve announcements.

In Case You Missed It:  Giants Catch Their Breath

Several tech giants are off to a rough start in 2026.  Microsoft (MSFT) is down 19% year-to-date.  Amazon (AMZN), the largest cloud computing provider and a major stakeholder in Anthropic, has fallen 9%.  Meanwhile, software stalwart Salesforce (CRM) has slid roughly 26%, and IBM has given up about 18% year-to-date.