Upon further review, a recalibrating, not retreating, Trump decided at the weekend that his 10% supplemental temper tantrum tariff on the whole of planet Earth under Section 122 of the Trade Act of 1974 was somehow not enough and he raised it to 15% and also vowed to use the manipulation of trade licenses to “do terrible things” to countries around the world, following the Supreme Court verdict that his signature IEEPA tariffs were illegal.

After quiet holiday-impacted sessions in Asia and Europe, US markets spent a winter storm-blitzed Monday trying to figure out the balance between the swirl of uncertainty generated by the ruling and the fact that, even with the weekend’s additional imposition, the effective average US tariff rate is now a bit lower and more time-limited than it was before the judgement.

Wall Street seemed paralyzed at the open and not just by the snowmaggedon in New York. But then the European Union announced a completely understandable pause in its ratification of the trade deal with the US “pending more clarity”. Software and e-commerce names were spooked by an apocalyptic Substack post from an independent research firm that went viral. IBM’s stock price had it worst day this century. The indexes decided that the only way was down and closed sharply lower.

Asian markets returned to normal on Tuesday after the extended lunar new year holiday and celebrated with gains. Fedex became the first company to sue the US government for a full refund of illegally-imposed tariffs and by the end of the week, 2,000 more lawsuits had been filed. The indexes recovered most of Monday’s losses but trading was cautious ahead of any possible outlandish announcements in Trump’s State of the Union speech later in the evening.

The president theatrically doubled down on tariffs without mentioning China once and downplayed the issue of affordability, neither of which are likely to do much to slow his rapidly-falling approval ratings.

Trump referenced Trump Child Accounts in his State of the Union speech. I recently created an explainer for these. You can read it here.

But there was nothing meaningfully new for Wall Street to chew on on Wednesday and stocks resumed their steady climb back out of Monday’s hole with Nvidia earnings on deck after the close, which have taken on the role as a sort of State of the Union for AI.

The company’s earnings beat expectations and it delivered its usual happy-clappy revenue outlook, but it wasn’t a huge wow and the vigorous two-day stock rebound ran out of steam when markets opened on Thursday. An unenthusiastic response to Nvidia’s numbers pushed the stock price down by over 5% which naturally turned the indexes into the red again and they closed significantly lower.

Stocks continued to tank on Friday after PPI data provided a bit of an inflation scare and AI bubble concerns persisted as Nvidia’s armor seems to have been pierced with another big price drop. Apple and Meta got battered too. A plunge in a number of financial stocks following the collapse of a major UK mortgage lender didn’t help either. The S&P 500 finished lower for the day, the week and the month and is pretty much only flat year to date.

As February came to a close, European stocks wrapped up their eighth straight month of gains, their longest such streak since 2013. The S&P 500, in contrast, suffered its biggest monthly drop since April. Treasury bonds had their best month in over a year as interest rates sank across the curve (the 10-year dropped below 4.00% last week) and the average 30-year fixed rate mortgage in the US fell below 6.00% for the first time in over three years.

Some other things I’m thinking about ..

* The four pillars of the large cap US stock rally since late 2022 (in order of importance: i) AI enthusiasm, ii) ongoing Fed Funds Rate cuts, iii) stable economic growth and iv) tariff clarity) are still just about in place if we look at them in a medium/longer term time frame, but they are all experiencing meaningful difficulties right now to one degree or another. This is why the rally in the major US indexes is stalling and assets are rotating into smaller capitalization and non-US holdings.

* Another feature of this rotation is that it is rewarding the stocks of companies with lots of capital assets that are costly to replicate and whose core businesses are less exposed to technological annihilation. Wall Street has of course come up with a snappy acronym for this group; HALO (Heavy Assets, Low Obsolescence). We are talking about names like McDonalds, Caterpillar, John Deere, Exxon-Mobil, Coca-Cola, Boeing and even the airlines.

* At the other end of the spectrum, SaaS (Software as a Service) stocks have become ground zero for concerns that AI could potentially destroy earnings power for certain market sectors and these stocks have been badly hurt this year. We are talking about names like Oracle, Palantir, Salesforce, Snowflake, Adobe, Workday, ServiceNow and many others.

* With the price crash from its peak reaching 50% in just four months, almost half the Bitcoin in circulation is now worth less than what its holder originally paid for it. That is why every attempted rally is dying on arrival as burned holders react to each bounce by aggressively selling, constantly killing any upward momentum. That capitulation has a compounding effect. Every sale at a loss removes a holder who might otherwise have been a future buyer.

I was recently interviewed by Vetta-Fi who host the annual Exchange ETF conference in Las Vegas about my practice. You can read the interview here.

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ARTICLE OF THE WEEK ..

A checklist of what to do to be a successful long term investor .. and, very importantly, in what order.

.. AND I QUOTE ..

“CEOs are going to hold off, waiting for some form of clarity which they’re not going to get. This is chaos reigns.”

Bill George, former CEO of Medtronic

LAST WEEK BY THE NUMBERS:

Last week’s market color courtesy of finviz.com

Last week’s best performing US sector: Utilities (two biggest holdings: NextEra Energy, Southern Co.) ⬆︎ 3.2% for the week

Last week’s worst performing US sector: Financials (two biggest holdings: Berkshire Hathaway, JPMorgan) ⬇︎ 2.0% for the week

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price fell 0.5% last week, is up 0.6% so far this year and ended the week 1.7% below its all-time record closing high (01/27/2026).

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price fell 1.2% last week, is up 6.2% so far this year and ended the week 3.8% below its all-time record closing high (01/22/2026).

* VXUS, a Global Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. Its price rose 0.5% last week, is up 11.1% so far this year and ended the week 0.6% below its all-time record closing high (02/25/2026).

INTEREST RATES:

* FED FUNDS RATE * ⬌ 3.625% (unchanged from a week ago)

* PRIME RATE ** ⬌ 6.75% (unchanged from a week ago)

* 3 MONTH TREASURY ⬇︎ 3.67% (3.69% a week ago)

* 2 YEAR TREASURY ⬇︎ 3.38% (3.48% a week ago)

* 5 YEAR TREASURY ⬇︎ 3.51% (3.65% a week ago)

* 10 YEAR TREASURY *** ⬇︎ 3.97% (4.08% a week ago)

* 20 YEAR TREASURY ⬇︎ 4.57% (4.66% a week ago)

* 30 YEAR TREASURY ⬇︎ 4.64% (4.72% a week ago)

Data courtesy of the Federal Reserve and the Department of the Treasury as of the market close on Friday

* Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.

** Wall Street Journal Prime Rate as of Friday’s close. Tending to move in lockstep with the Fed Funds Rate, this measure is used as a basis for determining certain consumer loan interest rates such as credit cards, auto loans, personal loans, home equity loans/lines of credit and securities-based lending.

*** Used as a basis for determining mortgage interest rates and some business loans

AVERAGE 30-YEAR FIXED MORTGAGE RATE:

* ⬇︎ 5.98%

One week ago: 6.01%, one month ago: 6.10%, one year ago: 6.76%

Data courtesy of the Freddie Mac Primary Mortgage Market Survey

INTEREST RATE EXPECTATIONS:

Where will the Fed Funds interest rate be after the next rate-setting meeting on March 18th?

* Unchanged from now .. ⬇︎ 95% probability (96% a week ago)

* 0.25% lower than now .. ⬆︎ 5% probability (4% a week ago)

With seven more rate-setting meetings in 2026, what is the most commonly-expected number of remaining 0.25% Fed Funds interest rate cuts this year?

* ⬌ Two (unchanged from a week ago)

Data courtesy of CME FedWatch Tool as of the market close on Friday.

All data based on the Fed Funds interest rate (currently 3.625%).

PERCENT OF S&P 500 STOCKS ABOVE THEIR OWN 200-DAY MOVING AVERAGE:

* ⬇︎ 65%

One week ago: 66%, one month ago: 66%, one year ago: 57%

Data courtesy of MacroMicro as of Friday’s market close

This widely-used technical measure of market breadth is considered to be a very robust indicator of the overall health of the S&P 500 index.

A high percentage (above 70%) generally suggests broad market strength and a bullish trend, while a low percentage (below 30%) may indicate market weakness and a bearish trend.

FEAR & GREED INDEX:

“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffett.

Data courtesy of CNN Business as of Friday’s market close

The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.

Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.

Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.

A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.

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