Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today I wanted to spend a few minutes to give you an update on the markets for the month of February.
Market Overview
U.S. stocks faced a rocky February, with uncertainty as the primary market driver. Concerns over tariffs, inflation, high stock valuations, and potential government layoffs caused the volatility. As a result, The S&P 500 index dropped 1.7% for the month, though it remains positive year-to-date. The tech-heavy NASDAQ experienced a steeper decline, down about 4.4% for the month, with major technology companies like Nvidia and Palantir leading the sell-off.
A positive takeaway for the month has been the strong performance of developed international stocks. The MSCI EAFE index gained 3.29% in February and is up 7.34% year-to-date.
GDP
The fourth quarter GDP remained steady at 2.3%, in line with expectations. A model from the Federal Reserve Bank of Atlanta, however, recently projected an economic contraction for the first quarter. While not an official forecast, this revision stems from expectations of weaker consumer spending due to the January weather and weaker exports, partly attributed to tariff concerns.
Jobs Market
The February nonfarm payrolls report is expected to show a gain of 160,000 jobs, up from 143,000 in January. The unemployment rate is expected to remain at 4%.
Federal Reserve & Bond Market
The Federal Reserve’s next meeting is scheduled for March 19th, with markets expecting no immediate changes to the interest rates. However, economic weakness has led the market to price in the possibility of two to three rate cuts by year-end, with a 75% probability of a rate cut at the June meeting. The Personal Consumption Expenditure (PCE) index rose 2.5% in January on an annual basis, in line with economic expectations. This data provides some relief after a series of economic reports indicating that inflation may be picking up again.
The 10-year Treasury yield dropped over 50 basis points (0.50%) for the month, finishing the month at 4.25%, as investors digested the latest economic data. This decline contributed to the lowest mortgage rates in more than two months, with the 30-year average mortgage rate falling slightly below 7%, according to Freddie Mac.
Outlook
Looking ahead, continued uncertainty is expected to contribute to market volatility. Investors will be closely monitoring any updates from the White House, particularly regarding tariffs and developments from DOGE. Additionally, upcoming nonfarm payroll numbers will be key in assessing the strength of the U.S. economy.
Thanks for joining me for this month’s market update.
