February 2026 Newsletter

Dear Clients and Friends,

We hope the start of spring finds you well and that you are enjoying the renewed sense of energy and opportunity that a new quarter brings. As we move into March, the market narrative remains complex but ultimately compelling. The bull market continues into its fourth year, supported by robust corporate fundamentals and the expectation of more favorable monetary policy. However, with optimism now heavily priced into valuations, we believe diligence and quality of selection will be more critical than ever.

‍Market Overview and Key Drivers

‍The market’s momentum is currently driven by a few key factors:

• Strong Earnings Forecasts: The primary driver for equities remains corporate earnings growth. Analysts are projecting significant annual earnings-per-share (EPS) growth in 2026, with estimates ranging from 14% to 16%. This forecasted growth, particularly outside the mega-cap technology names, is a key catalyst for a broadening bull market.
• Federal Reserve Easing: The Federal Reserve is expected to continue its easing cycle, with markets pricing in a total of 50 more basis points of rate cuts in 2026. This move should result in a fully steepening yield curve, with short-term rates falling by more than long-term rates (10-year Treasury yield estimated around 3.75% by year-end 2026).
• Elevated Risks and Valuations: Despite the positive outlook, market complacency remains a concern. Valuations are high, and "risk premiums" are minimal, suggesting the market is "brittle" and susceptible to outsized reactions from small missteps. Key wild cards to monitor this year include volatility in Artificial Intelligence (AI) sentiment, continued trade/tariff drama, and the upcoming appointment of a new Federal Reserve Chair in May 2026.

Investment Strategy and Focus

‍Our allocation remains focused on areas we believe offer the best risk-adjusted opportunities, leveraging the firm’s long-term conviction while responding to current market conditions:

• Equity Focus: We remain overweight in the Information Technology sector, viewing the continued build-out of AI infrastructure as a powerful catalyst for growth. We also maintain favorable positions in the Financial, Health Care, and Autocall Income sectors as defensive complements and beneficiaries of the current economic cycle.
• Fixed Income Strategy: The expected easing cycle is favorable for bonds. We continue to prioritize high-quality, investment-grade domestic credit at the short- to intermediate-term segment of the yield curve to capture income with limited price risk. We are also utilizing floating-rate senior bank loan funds and structured notes for low interest rate sensitivity, which is particularly prudent in a period of potential yield curve steepening.
• International/Emerging Markets: We recognize that a weakening U.S. dollar, stronger global growth forecasts, and potential central bank easing in developing nations are creating more attractive opportunities in international and emerging market equities. While our portfolios are currently underweight or eliminated from these areas, we are actively reviewing the strength of these improving fundamentals against our existing allocation to determine if an adjustment is warranted.

Planning and Looking Ahead

As we enter the final month of the first quarter we want to highlight our planning focus.

• Our Q1 Planning Focus:
  
  • Review annual savings and or withdrawal rates
  • Review the 12 month cash position
  • Define or update financial goals for the year
  • Tax return preparation and review

As always, our strategy remains anchored to the principle that long-term returns are driven by corporate earnings and disciplined, diversified investing. We encourage you to reach out if you would like to schedule a review of your portfolio in light of these shifting market dynamics.

All the best,

Stephen