February 2026 Market Highlights

February 2026 Market Highlights
Investors in Canadian equities benefited again in February as the S&P/TSX Composite Index significantly outperformed the S&P 500 and Nasdaq. This trend also holds on a year-to-date (YTD) and rolling 1-, 3-, and 5-year basis. U.S. stocks also lagged European and Japanese markets during the month.

Markets were somewhat volatile as renewed concerns about the potential economic impact of Artificial Intelligence (AI) weighed on technology stocks. Late in the month, geopolitical tensions also increased after the U.S. and Israel attacked Iran, leaving markets entering March in an environment of heightened uncertainty.

For the month, the S&P/TSX Composite Index rose 7.72%. By comparison, the S&P 500 declined 0.79% and the Nasdaq fell 3.33%. International markets were stronger, with the MSCI World Index gaining 0.96% and the MSCI EAFE Index rising 5.45%. In Europe, the FTSE 100 climbed 7.04% and Germany’s DAX increased 3.04%. In Asia, Japan’s Nikkei 225 surged 10.41% while the MSCI China Index declined 5.82%.

Bond markets strengthened as yields declined. The U.S. 10-year Treasury yield fell below 4% for the first time since November. In Canada, the FTSE Canada Universe Bond Index rose 1.66%. Commodity markets were mixed, with gold rising 4.80%, silver falling 12.85%, and Brent crude oil gaining 2.78%.

Economic Developments

U.S. economic growth slowed in the fourth quarter of 2025, with GDP rising 1.4% annualized. However, the labour market remained resilient, with 130,000 jobs added in January and the unemployment rate falling to 4.3%.

Inflation data showed mixed signals. Consumer inflation eased to 2.4% in January, but wholesale inflation increased more than expected as businesses passed along higher costs. Retail spending was flat in December as households reduced spending on larger purchases. Consumer confidence improved modestly in February but remains below recent highs.

In Canada, the economy contracted by 0.6% in the fourth quarter of 2025, partly due to declining business inventories. However, stronger exports, consumer spending, and government investment helped offset some weakness. Canada lost nearly 25,000 jobs in January, though the unemployment rate declined to 6.5% as fewer people were actively seeking work.

Inflation in Canada eased slightly to 2.3%. Lower gas prices and moderating rent increases helped offset continued high food inflation, which rose 7.3% year-over-year.

Canadian manufacturing activity remained soft, with factory shipments estimated to have declined 3.3% in January. However, Canada’s Big Six banks reported strong earnings for the first quarter of fiscal 2026, with combined profits reaching approximately $19 billion, significantly higher than the previous year.

Global Outlook

Globally, central banks remain cautious. The European Central Bank kept rates unchanged as inflation remains near its 2% target while geopolitical tensions continue. The Bank of England also held interest rates steady amid slowing economic growth.

China’s manufacturing activity showed mixed signals, indicating modest stabilization but continued weak demand. Japan’s economy grew slightly in the fourth quarter, while inflation in Tokyo eased below the Bank of Japan’s target for the first time in over a year.

Looking Ahead

Several developments could influence markets in the coming months, including the U.S. Supreme Court ruling on tariffs, the continued impact of AI on industries and employment, and geopolitical tensions that could affect energy prices.

Despite these uncertainties, corporate earnings and financial markets have shown resilience over the past year. As 2026 moves toward the end of the first quarter, investors are increasingly showing interest in value and dividend-paying companies that generate consistent cash flow.

Maintaining a diversified portfolio aligned with long-term financial goals remains a key strategy for building wealth and supporting retirement income.

Regards,

Glenn

Note:
All index performance is in Canadian dollars.

IMPORTANT DISCLAIMERS
The information in this letter is derived from various sources, including CI Global Asset Management, CRA, Bloomberg, National Post, Globe and Mail, Wall Street Journal, Bloomberg, Reuters, Investment Executive, Advisor.ca, MarketWatch, Toronto Sun, The Guardian, MSN.ca and Statistics Canada at various dates. This material is provided for general information and is subject to change without notice. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document.