February was not a favorable month for either U.S. or Chinese equities. The S&P 500 closed slightly negative, the Nasdaq declined around 2%, and the MSCI China index fell nearly 5.8%.
In contrast, the beginning of the year has been particularly positive for European, Indian, and broader Asian equities (excluding China), which have generated returns ranging between 7% and 15% year-to-date. This once again highlights the importance of maintaining proper geographical diversification within investment portfolios.
United States: Software Correction, AI Concerns, and Trade Noise
During February, the U.S. software sector experienced a sharp correction, leading technology declines and weighing heavily on the Nasdaq. This came after weeks of solid corporate earnings that nevertheless failed to meet the extremely elevated expectations already reflected in valuations and multiples.
The growing risk narrative surrounding artificial intelligence intensified the sell-off. AI agents capable of automating tasks previously handled by traditional software could erode licenses, subscriptions, and services, particularly affecting SaaS (Software as a Service) business models based on per-user pricing.
This was further reinforced by investor rotation toward sectors and assets perceived as less exposed to technology.
As a result, sector multiples compressed significantly, and software companies are now trading at historically large discounts relative to the Nasdaq, reflecting both a correction in expectations and a broader structural reassessment of AI’s long-term impact on the industry.
Toward the end of the month, fears surrounding AI-driven disruption spread beyond the technology sector, affecting even traditionally defensive industries such as banking and payment platforms.
A report published by Citrini Research analyzing possible AI scenarios triggered broad market selling on Monday the 23rd.
Companies such as JPMorgan, Visa, Mastercard, and American Express suffered notable declines, signaling that investors are beginning to extrapolate technological risk toward business models dependent on financial transactions, services, and highly qualified employment.
Within this context, NVIDIA’s earnings became one of the most important market events of the month.
The company once again demonstrated exceptional operational momentum, showing no signs of slowdown. NVIDIA reported record revenues of $68.1 billion, alongside a strong gross margin of 75%, reflecting both robust demand and significant pricing power.
Additionally, the company’s guidance for the first quarter of 2026 projected revenues of approximately $79.6 billion, reinforcing the narrative of continued business expansion.
Macroeconomic Data and Trade Policy
On the macroeconomic front, U.S. economic data continued to reflect an economy that remains resilient, although showing signs of moderation.
January unemployment came in at 4.3%, slightly better than the 4.4% expected by the market. Meanwhile, January CPI inflation reached 2.4%, below the 2.5% consensus estimate.
However, quarterly GDP growth expanded only 1.4%, roughly half the 2.8% expected by analysts.
Although the GDP figure may initially appear weak, it was largely explained by the partial U.S. government shutdown, which lasted nearly half of the quarter.
On the political and trade front, the U.S. Supreme Court issued a key ruling regarding the legality of certain tariffs imposed by the Trump administration.
The decision partially limited the administration’s ability to impose some measures without additional legislative approval, introducing legal uncertainty and opening the door to potential revisions of U.S. trade policy, something that markets did not receive positively.
Additionally, tensions between the United States and Iran escalated during the month following incidents in the Middle East related to Iran’s nuclear program, new economic sanctions, and an unprecedented military deployment in the region.
This geopolitical risk increased the risk premium embedded in oil prices and boosted demand for safe-haven assets such as gold.
Private Credit: Focus on Blue Owl
One of the main areas of concern during the month was the case of Blue Owl Capital, one of the largest financiers behind the physical infrastructure buildout required for artificial intelligence.
Unlike publicly traded technology firms, Blue Owl’s exposure is not centered on software development but rather on structuring multi-billion-dollar loans used to finance data centers for companies such as Meta Platforms and CoreWeave.
The issue emerged when, during February, the firm was forced to sell approximately $1.4 billion in loans from several funds in order to generate liquidity and meet redemption requests.
Even more concerning, Blue Owl permanently suspended quarterly withdrawals in one of its retail-focused investment vehicles, deciding instead to return capital progressively as underlying assets are liquidated.
Although the loans were sold close to par value — suggesting no immediate deterioration in credit quality — the signal sent to the market remains delicate.
The need to dispose of assets and restrict liquidity has raised doubts about the sustainability of the financing model that fueled the rapid expansion of data centers.
Markets are beginning to question whether the high levels of leverage used to finance this growth can remain sustainable if AI-related revenues fail to expand at the expected pace.
In an environment where much of the investment narrative relies heavily on future growth expectations, any funding tension introduces a vulnerability that concerns both institutional and retail investors alike.
Europe: Strong Equity Performance Driven by the ECB and Earnings
European equity markets posted very strong performance throughout the month, with broad gains across indices such as the Euro Stoxx 50, DAX, and CAC 40.
This performance was driven by several key factors.
On one hand, macroeconomic data showed inflation in the eurozone slowing more rapidly than expected.
The latest inflation reading of 1.7% was the lowest recorded in the region since 2024, strengthening expectations of future interest rate cuts by the European Central Bank.
Additionally, corporate earnings season surprised positively, with 57% of companies exceeding analyst expectations.
Taken together, this environment encouraged capital inflows into European equities and maintained a clearly optimistic tone across markets during much of the month.
Asia: Highs in Japan and Korea Before the Geopolitical Shift
Asian equity markets experienced mixed performance, with several standout moments followed by a month-end reversal driven by geopolitics.
Japan and South Korea led gains throughout much of February.
The Nikkei 225 traded close to 59,000 points in several sessions, while the KOSPI surpassed the important 6,300-point level, supported by strong investor appetite for Asian technology and cyclical sectors.
However, during the final trading day of February, tensions escalated sharply between the United States, Israel, and Iran, pushing oil prices higher and triggering a global increase in risk aversion.
This geopolitical shift caused equity declines and a sharp rise in volatility at month-end, partially offsetting the strong gains previously recorded across Asian markets.
Portfolio Implications
February once again demonstrated that the primary market risk in 2026 is not strictly macroeconomic, but rather linked to valuation and positioning.
The software correction highlighted how even companies with reasonably solid fundamentals can experience sharp declines when market expectations change.
At the same time, rotation away from technology and into other sectors continued, something clearly visible in market breadth indicators.
Despite the S&P 500 delivering negative returns year-to-date, approximately 65% of its constituent companies — representing around 38% of the index weighting — have outperformed the broader index, reflecting the underlying strength of the U.S. economy.
Within this context, recent developments reinforce our thesis of reducing exposure to U.S. equities in favor of emerging markets such as China and India, where relative valuations remain more attractive.
Finally, although the euro corrected slightly against the dollar during the month, we maintain our decision to preserve currency hedging strategies.