Week ended Feb 20th, 2026: Stocks eke out gains

This past week was largely uneventful in spite of some potential market-moving news, especially on Friday.  US Treasuries traded in a narrow range as they have over the last several months, although yields ended a touch higher across the curve.  US stocks also struggled to find momentum although tech stocks finally demonstrated some resiliency, pushing most US indices higher for the week. In Europe, stocks closed at record highs, with EM stocks also posting gains.  Japanese stocks were a touch lower, coming off of a strong two-week run.  In China, markets were closed all week for Chinese new year celebrations in the Year of the Horse, with markets set to reopen next Tuesday.  In corporate credit, spreads were 2bps wider in investment grade but slightly tighter in high yield, avoiding contagion from the Blue Owl private credit situation (discussed further below).  Both gold and the greenback were stronger on the week, and Bitcoin was down modestly again, adding to its sharp losses YtD.  The section "Market Data & Tables" below contains updated data for the indices and assets tracked by EMC.

WHAT MATTERED TO INVESTORS LAST WEEK

WHAT MATTERED LAST WEEK

Supreme Court decision, tariffs:  The Supreme Court finally issued its decision regarding President Trump’s tariffs on Friday, ruling that the president overstepped his authority by imposing blanket tariffs without Congressional approval.  This is an evolving situation, so it is hard to tell where we will go from here although Mr Trump will push back.  His rant following the decision was epic, and you can watch it here.  The president rather quickly announced a new 10% blanket tariff which is allowed apparently for 150 days without Congressional approval under some obscure provision.  In spite of the fact that tariffs have raised some $195 billion (Mr Trump claims over $900 billion…..naturally), the U.S. trade deficit has continued to worsen as you can see in the graph below from #Bloomberg.

Investors seemed to greet the news favourably with U.S. stocks rising after the decision, mainly because many small and medium size businesses have struggled with higher import costs of component goods. 

Slew of U.S. economic news on Friday:  

• U.S. 4Q25 came in much lower than expected at 1.4% YoY

• The change in Personal Consumption Expenditures (PCE) – the Fed’s preferred measure of inflation – came in higher than expected.  Headline PCE in December increased to 2.9% YoY (vs 2.8% in Nov), and core PCE increased to 3.0% (vs 2.8% YoY in Nov).  The data is somewhat stale (since Dec), and did not change expectations of two decreases in the Fed Funds rate in 2026. 

• Flash manufacturing PMI and services PMI for February both came in slightly lower than expected, although both still show that the U.S. economy is growing albeit slower than in several months.Investors seemed to greet the news favourably with U.S. stocks rising after the decision.

European economic data:  Economic data in Europe was generally better than expected for both the Eurozone and the U.K.  Germany in particular reported stronger-than-expected flash manufacturing and services PMI for February, contributing to decent gains in manufacturing and services in the common currency bloc.  U.K. inflation for January appeared to be on target, and U.K. retail sales for January came in much stronger than anticipated.

FOMC minutes / NY Fed’s tariff paper:  The Fed was back in focus even between FOMC meetings, probably due to a dearth of other news that mattered in the front half of the week.  The minutes of the last FOMC meeting suggested that the majority of the FOMC remains very focused on and concerned about inflation.  The same day, Kevin Hassett –

Director of the National Economic Council – harshly criticized a February 2026 Federal Reserve Bank of New York paper, "Who is Paying for the 2025 U.S. Tariffs?," calling it the "worst" in Fed history. The study concluded that U.S. businesses and consumers bore roughly 90% of the 2025 tariff costs.  Naturally, this does not fit the narrative of tariffs espoused by the Trump Administration.  The administration “threw their toys out of the pram” as Mr Hassett complained aggressively about who really pays for tariffs.  Ultimately, investors said “so what”.

Blue Owl alters quarterly distribution mechanism:  Private credit focused asset manager Blue Owl halted voluntary quarterly redemptions  from one of its private debt funds this week, instead adopting  a formulaic approach to distributions.   CEO Craig Packer tried to downplay any concerns.  The change in the quarterly pay out mechanism raised concerns that caused shares of other publicly-held private credit firms to fall, although there was no drift into the private credit asset class (that was visible) or into the public high yield market. 

Exodus from NYC to Texas??:  I am in America at the moment, and I spent a few days last week in Texas. It was only fitting perhaps that one area of domestic political focus is on migration of people from high tax states to low tax states, with New York City now very much in focus.  With just-elected NYC mayor Mamdani threatening higher New York City property taxes to close a budget gap, the fear of New Yorkers moving to lower tax states like Florida and Texas has become very real.  I thought it was very interesting to see Partnership for New York City release a paper last week entitled “Texas’s Competitive Edge”.  See what you think. 

MARKET DATA AND TABLES

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