Capitalize on today's evolving market dynamics.
With changes to taxes and interest rates, it's a good time to meet with a wealth advisor.
2026 Investment outlook webinar
Capital markets, taxes, and your financial plan
February 25, 2026
Market News
Market analysis
February 17, 2026
Employment strength, moderating inflation and steady earnings growth continue to shape the market backdrop, while elevated valuations, increased government borrowing and selective policy risks underscore the importance of balance.
Number of the week:
130,000
The number of U.S. jobs added in January, roughly double economists’ expectations.
Term of the week:
Valuation
The analytical process of determining the current (or projected) worth of an asset or a company. In the case of public market equities, it is often a reference to the relative price of a company or index when compared to its earnings, sales, market capitalization or other fundamental values.
Quote of the week:
Valuations remain elevated but are supported by earnings expectations. Cooling inflation and steady job growth continue to underpin confidence in corporate profitability. Analysts expect S&P 500 earnings to reach $312 per share in 2026, representing a 13.4% increase from projected 2025 earnings of $275. At current levels, the index trades near 25 times 2025 earnings and 22 times 2026 estimates, leaving less margin for adverse surprises.
― Terry Sandven, Portfolio Manager, Chief Equity Strategist, U.S. Bank
U.S. Bank Asset Management Group
William Northey
Head of Asset Management Group
Kaush Amin
Head of Private Market Investing
Chad Burlingame
Head of Impact Investments
Thomas Hainlin
National Investment Strategist
Robert Haworth
Senior Investment Strategy Director
William Merz
Head of Capital Markets Research
Terry Sandven
Chief Equity Strategist
Global economy
Quick take: The economy continues to expand at a measured pace as employment remains firm and inflation eases. Consumer activity and global growth show durability, even as momentum moderates and targeted policy disruptions add uncertainty.
- Labor market data reflects stability rather than strain. Employers added 130,000 jobs in January, roughly double economists’ expectations and the strongest monthly increase since December 2024. Labor force participation improved and the unemployment rate declined to 4.3%, supporting aggregate income growth. Bureau of Labor Statistics annual revisions show an average of just 15,000 new jobs per month in 2025, indicating a cooling labor market trend rather than a sudden weakening.
- Consumer spending remains resilient, though demand patterns continue to shift. Retail sales were flat in December relative to November, and the retail control group, which excludes volatile categories like autos, gasoline, building materials and food services slowed to 3.4% year-over-year, reflecting softer demand for goods. Broader measures that include services remained firmer, with point‑of‑sale transactions rising 5.3% year-over-year in January. Overall consumer spending increased 5.4% year-over-year, suggesting households are adjusting rather than pulling back.
- Inflation continued to ease in January. Consumer prices rose 2.4% year-over-year, down from 2.7% in December, the lowest level in more than four years. Stable housing and rent measures helped offset higher prices in tariff‑affected goods such as furnishings and apparel. The ongoing moderation brings inflation closer to the Federal Reserve’s (Fed) longer‑term objective.
- The Department of Homeland Security (DHS) shutdown adds policy uncertainty. Current appropriations for DHS have lapsed, though much of its funding from the One Big Beautiful Bill Act remains intact, while most other federal agencies remain funded. Essential services continue, but many employees are working without pay, which could strain operations if the shutdown persists. Markets have so far viewed the disruption as contained, though prolonged delays could weigh on confidence.
- Global growth remains uneven but broadly constructive. The United Kingdom reported 0.1% gross domestic product growth in the fourth quarter, lifting full‑year growth to 1.4%. The eurozone confirmed 0.3% quarterly growth, while Japan reported a notable increase in machine tool orders in January. China’s home prices continued to decline, highlighting ongoing challenges tied to its housing market.
Equity markets
Quick take: Equity markets continue to reflect underlying economic resilience, with performance broadening beyond last year’s leaders. Earnings momentum remains supportive, while elevated valuations heighten sensitivity to shifts in growth and policy expectations.
- Recent performance reflects broader leadership and rotation.
The Dow Jones Industrial Average surpassed 50,000 for the first time, supported by gains across both cyclical and defensive sectors. International markets, including developed and emerging economies, posted modest gains, while the S&P 500 and Russell 2000 edged lower. Year-to-date, the 20 largest companies in the S&P 500 have declined 4%, compared with flat performance for the broader index. - Valuations remain elevated but are supported by earnings expectations. Cooling inflation and steady job growth continue to underpin confidence in corporate profitability. Analysts expect S&P 500 earnings to reach $312 per share in 2026, representing a 13.4% increase from projected 2025 earnings of $275. At current levels, the index trades near 25 times 2025 earnings and 22 times 2026 estimates, leaving less margin for adverse surprises.
- Fourth quarter earnings continue to exceed initial expectations. With approximately 74% of companies reporting, revenue and earnings growth are tracking at 8.9% and 12.2%, respectively. These results exceed the initial growth expectation of 7.9% for both. Additional reports over the coming weeks will help clarify whether earnings momentum remains broad based.
- Artificial intelligence investment remains capital intensive and long dated. Large technology companies continue to deploy significant capital, with Amazon, Microsoft, Alphabet and Meta expected to invest roughly $650 billion in 2026, up from an estimated $380 billion in 2025. Spending remains focused on computing infrastructure and data centers. Productivity gains and profitability typically follow such investment cycles with a lag.
Bond markets
Quick take: Bond markets benefited from falling yields last week as inflation eased further. Investor attention remains focused on policy expectations, government borrowing needs and underlying credit conditions that continue to shape income opportunities.
- Most bond sectors posted gains last week as U.S Treasury yields declined. Longer‑maturity bonds led returns, reflecting increased confidence that inflation pressures are easing. Core aggregate bonds and investment‑grade corporate bonds each gained 0.9%, while investment‑grade municipal bonds rose 0.5%. Structured credit sectors also delivered positive returns amid stable fundamentals.
- Interest rates continue to reflect expectations for eventual policy easing. Markets are pricing in two to three Federal Reserve rate cuts this year, with inflation trending closer to the Fed’s 2% objective. Fed officials have emphasized patience, noting the need to confirm sustained progress. This balance continues to influence rate volatility across maturities.
- Treasury issuance patterns remain an important influence on yields. The Treasury issued $193 billion in net new Treasury bills in January, more than four times the issuance of medium‑ and long‑term debt. Officials expect to maintain stable auction sizes for longer maturities, limiting supply‑driven pressure on yields. Treasury bills currently offer lower yields than longer‑dated securities, reducing near‑term funding costs.
- Corporate and municipal bond fundamentals remain broadly supportive. Corporate balance sheets remain near historical norms, with earnings and cash flows sufficient to service debt obligations. Both investment‑grade and high yield bonds have yields near current coupon levels, reducing companies’ debt refinancing risk. Municipal bonds continue to benefit from strong state balance sheets, while mortgage bonds remain supported by significant home price appreciation over the past decade.
Real assets
Quick take: Real assets rebounded last week as declining interest rates improved relative income appeal. Strength in real estate and infrastructure highlights continued demand for durable cash flows amid economic uncertainty.
- Real estate performance benefited from lower rates and solid earnings. Real estate investment trusts (REITs) gained 3.8% last week, with declining Treasury yields improving financing conditions. Data center REITs, representing about 9% of diversified exposures, rose 9.4%, while healthcare, roughly 17% of exposures, gained 5.3%. Most property types advanced, with offices remaining the primary laggard.
- Infrastructure assets extended their recent strength. Global infrastructure rose 4.0% last week, lifting year‑to‑date returns to 11.4%. Global utilities gained 5.8%, North American energy infrastructure advanced 5.2% and industrial infrastructure added 1.6%. Dividend increases across energy infrastructure supported performance.
- Commodity markets delivered mixed signals. Broad commodities declined 0.7% last week, though oil prices remain up 9.4% year-to-date amid geopolitical tensions. Natural gas prices fell 5.9% but remain above levels seen before January’s winter storm. Gold and silver rose 1.6% and 0.5%, respectively, amid ongoing volatility.
This information represents the opinion of U.S. Bank. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.
Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.
Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 actively traded blue chip stocks and is the most widely used indicator of the overall condition of the U.S. stock market. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index and is representative of the U.S. small capitalization securities market.
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Investing in fixed income securities is subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in high yield bonds offer the potential for high current income and attractive total return but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer's ability to make principal and interest payments. The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes but may be subject to the federal alternative minimum tax (AMT), state and local taxes. There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).
©2026 U.S. Bank
Insights from our experts
How we approach your long-term investing success
We use a data- and process-driven three step methodology to develop an investment strategy unique to you.
The debt ceiling debate in focus
With the U.S. government’s authority to borrow money bumping up against the federally mandated debt limit this year, is a political confrontation brewing that could impact capital markets?
Analysis: Assessing inflation’s impact
Persistently higher prices continue to weigh on consumers and policymakers alike.
Start of disclosure content
Disclosures
Start of disclosure content
Start of disclosure content
Equal Housing Lender. Deposit products offered by U.S. Bank National Association. Member FDIC. Credit products offered by U.S. Bank National Association and subject to normal credit approval.