The Chartist February 2026 Recap and Outlook

February was one of the most volatile months we’ve seen in a long time. Sector rotation, AI scares, and war brewing in the Middle East all combined to send markets whipsawing. Join The Chartist’s Zach Radge as he looks back on the major events of February and the risks ahead for March.

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Video Transcript

February turned out to be one of the most volatile months we’ve seen in quite a while. In this video, we’re going to look back at what drove markets in February and what it might mean heading into March. Now, there’s an obvious story dominating headlines at the moment, but first we need to take a step back and look at what the market was already doing beneath the surface before we get to that.

In last month’s review the outlook for February was, firstly, persistent volatility but also the continued rotation away from growth stocks to more traditional value stocks. We definitely saw both of those patterns continue across the entire month, and we don’t have to dig very deeply to see that.

Sector Rotation, Growth, and Value

The S&P 500 index slid -0.9% for the month, and if we look at the S&P 500 chart, we can see it’s just swinging up and down, treading water for the entire month. HOWEVER, the S&P 500 index is weighted by market capitalisation, which means the biggest companies, which are mainly tech companies, have a much greater influence over its performance than companies with a smaller market weighting.

On the other hand, the S&P 500 equal-weighted index tracks the performance so that the movement of every one of the 500 stocks is given the same weight. THAT index returned 3.4% for the month, and if we look at its chart, it looks a whole lot less choppy than the standard S&P 500 chart.

So, what does that mean? It means that under the surface of the S&P 500, the lower market cap stocks are overperforming, while the larger cap stocks are underperforming. In other words, the tech giants that carried the market in recent years are now starting to drag it down, while the broader market is quietly strengthening underneath.

Now, what exactly do we mean by growth and value stocks?

Growth stocks are companies that we expect to expand rapidly; they usually come from emerging industries and technology, and most obviously at the moment that’s tech and AI stocks like Nvidia, Tesla, or Google. Value stocks, on the other hand, are your more established industries and sectors, things like staple food products, energy generation, or large banks.

If we take a look at the individual sector’s performance for the month, we can very clearly see this rotation playing out. Utilities gained a massive 10%, its best month since March 2022, while consumer staples had its best month since October 2022.

AI Scepticism

So, why is this happening? Well, we’re seeing increasing scepticism about the current valuations of those massive tech companies like Nvidia, and people are questioning whether it’s possible for them to continue growing. Nvidia’s earnings, for example, massively beat expectations and came with a stellar forecast for the next quarter as well, and yet the stock fell significantly the next day, suggesting investors were already pricing in near-perfect growth.

AI Scares

And this also links to another pattern we saw across the month: AI scares. Multiple times a new AI model or product was announced, triggering a selloff in exposed sectors, and then a partial recovery. Most notably, this hit software companies and the finance sector, as AI tools posed a potential threat to those businesses, and investors sold first and asked questions later. This was a huge contributor to the overall volatility of the market but also added to the broader scepticism around the tech industry.

Inflation, Energy, the US, Israel, and Iran

But before you go and ditch all your growth stocks for staples, let’s talk about the elephant in the room. Throughout February, we saw persistent sabre-rattling and escalating tensions between the US and Iran. This, of course, came to a head last weekend, with the US and Israel launching a full-scale aerial assault on the Persian country. Now, I’m not going to play armchair general and pretend I know where any of this is heading. However, this instance of open conflict is obviously more severe than the strikes we saw in Iran in June last year. Already, shipping traffic through the Strait of Hormuz has come to a standstill, LNG production facilities in Qatar have halted production, the bulk of Iran’s leadership has been eliminated, and the conflict looks set to continue, at least into the near future.

If this conflict or any ensuing fallout does drag out, energy prices may stay elevated as supply becomes more difficult. At the present time, we’re already seeing rapidly climbing prices in oil, natural gas, and diesel. Higher energy prices mean higher input costs for businesses, as transport and logistics costs increase. It also means higher costs of staples like food and construction, which can then mean higher inflation in the long term.

However, if we take a look back at energy prices around the 2025 US strikes on Iran, we can see them spike quickly but subside before the month is over. So, if the situation does receive a decisive end in the near term, things may cool down just as quickly as in 2025.

What To Look For In March

So, heading into March, there are three major forces markets will be watching. Geopolitical risk, volatility, and the potential for increased inflation.

The turbulence in equities we saw across February does not look to be going anywhere, anytime soon. Already, earlier this week, the Dow Jones Industrial saw one of its biggest single-day drops since the tariff liberation day.

One thing in particular we will be watching is the effect an ongoing war and increased inflation could have on the sector rotation we were talking about earlier. The AI boom has been financed largely by private credit companies that are willing to make loans where traditional banks won’t. If elevated energy prices do lead to increased inflation, we may in turn see interest rate cuts paused or even rise. This could lead to a tightening of private credit lending and thus less investment and growth in the AI space.

However, that doesn’t mean value stocks are going to be automatic winners in the scenario. Consumer staples, for example, still rely on fuel and energy for production and transportation. A prolonged elevation in oil prices threatens to cut into their profits and into their stock prices.

It’s important to remember that this situation is ongoing and fluid. Global markets quickly recovered from US strikes on Iran in June 2025. Likewise, the US incursion in Venezuela earlier this year had little ongoing effect on markets. If the conflict remains contained, the inflation risk may fade quickly, just as we saw after the strikes in 2025. But if oil supply remains constrained, markets could be entering a more complex macro backdrop than we’ve seen recently. As always, the Chartist portfolios have regime filters and protective measures in place to navigate these outcomes.

The Chartist Portfolio Performance (US)

Alright, let’s move on to how The Chartist’s portfolio performed for February, and I’ve been talking for a while now, so I’ll make this quick.

Starting on the US side with the US Momentum, the portfolio gained +6.6% for the month, bringing it to 10% year to date. We saw some nice runs there from some of our tech companies, but a few of those positions closed out now as their volatility passed over the portfolio’s threshold.

The US high-frequency portfolio increased by 2% for the month to bring it just below 4% year to date. Interestingly, it actually entered portfolio protection very briefly there, but you may not have even noticed because of how quickly the turnover occurs.

The US All Weather Portfolio rose 2%, driven up mainly by its diversified commodity holdings and not a lot of action from bonds or market indexes there.

The Trade Long Term portfolio hit the brakes a bit as most of its tech holdings treaded water for the month. It gained 0.22% for the month to bring the year-to-date return to 16.26%.

The Chartist Portfolio Performance (ASX)

Moving on to the ASX now, I didn’t mention it at all in the market review, but across the month it mainly just reacted to the broader global market news. Similar to the US, the ASX is seeing that same move away from technology towards value stocks, and particularly a lot of movement in the materials sector as commodity prices rise.

To the portfolios, the ASX Momentum re-entered the market in February after sitting out January and was rewarded with an 11.1% gain almost entirely off the back of mining stocks, which are where the bulk of the momentum is in Australia at the moment.

The model growth portfolios had a tough month, with version 2 falling -4.20% and the defensive -2.60%. Some of those losses are in positions that have been open for many months now and are stuck at highs, waiting to either continue the trend or exit the position; that’s just the nature of trend-following strategies.

Lastly, the ASX All Weather declined -2.9%, to bring it to a 0.7% gain year-to-date. While it did profit in its commodity holdings, that was not enough to offset the global equity holdings, which declined, and adding to that, the Australian dollar rose again against the US dollar.

Alright, we’ll leave it there for now. Stay safe, and if you’ve got any questions, feel free to reach out!