Monthly Market Outlook February 2026

2026 has started with a lot of bangs as traders try to survive tons of surprising news and changing risks. In the current environment, it is a bit hard to see what will happen in the global economy and markets, but despite the fog, some key data and developments might help get a clearer picture. 

Macro View 

Geopolitics remains the number one topic. The Greenland tensions between the US and European countries took most of the attention in January. Trump even announced extra tariffs while the EU prepared to retaliate. But Trump suddenly de-escalated the situation at Davos, though the problem could be far from over. The US has expectations, and if they are not met, this could become an issue again in the coming months. 

The Venezuela operation shook everyone in the world. The US neutralized Venezuelan defenses and took Maduro out of his bed in just a couple of hours. This has implications for geopolitics and the oil market. The idea that no leader is safe is a dangerous one, and the operation was a huge confidence boost to Trump, which later escalated situations for Cuba, Greenland, and Iran. Iran seems to be the current target. As of the time this article was written, there had been no operation toward Iran, and Trump said Iran is really talking with Middle East allies. An Iran confrontation is a big risk to markets. 

At the January meeting, the Fed held rates steady at 3.75% with only two dissenters, Waller and Miran. Changes in the Fed’s statement, such as “economy expanding at a solid pace” instead of “moderate pace” and “unemployment rate has shown some signs of stabilization” instead of “edged up,” were important and show that there is no need for a rate cut in the coming months unless the overall outlook worsens. The market is still pricing in two cuts this year, but not before Powell’s term is over. 

Total nonfarm payrolls are over one standard deviation above the 2000-to-date regression line, meaning the labor market is still significantly strong. However, the jobs market has almost always been shaken up after payrolls plateau at high levels, which will be a risk for the second half of the year, especially with AI’s pressure on the jobs market. 

The new chair nominee, Kevin Warsh, is perhaps the most hawkish candidate in Trump’s pool, but lately he has aligned himself with Trump on most economic policies. The post-Powell Fed will be interesting to watch because members and the chair could diverge in policy voting. 

Inflation has been stuck between 2.5% and 3.5% since early 2024 with no sign of reaching the 2% target. The recent PPI release showed that producer inflation reached 3% again. Although services disinflation continues, goods prices have started to pick up and offset some of the effect. Food inflation also continues to be a problem. 

Liquidity problems eased somewhat in January after the Fed started to expand its balance sheet again. Although still not fully recovered, its positive effect on the dollar ended, resulting in a sell-off for the dollar index. 

The dollar index fell below the long-term trendline from the 2011 bottom. The first weekly close below the trendline could be temporary, but broken trust in the US by its allies, risks to the Fed’s independence, and tariffs have all started to weigh down on the dollar. We don’t think it is broken yet and it is likely to recover, but later in 2026 downward risks could mount even more. 

PMI data show that overall activity expansion continues around the globe. US PMI stabilized below 53 after falling in the second half of 2025, still positively diverged. 

China’s composite PMI fell below 50 for the second time in three months. Despite staying strong on exports, domestic demand remains too weak to sustain strong GDP growth. The Chinese government is likely to take action in 2026 to stabilize the housing sector and boost internal demand. 

The UK composite PMI jumped to 53.9, likely including some over-optimism due to budget relief. However, the rise in new orders and optimism paints a good picture for the first quarter. 

The EU composite PMI remains stable, showing steady economic expansion. At the December ECB press conference, Lagarde pointed to rising investments. After the EU-India trade deal, economic optimism and investments might pick up even more. 

While investments pick up, low-priced goods flowing into the EU market might have disinflationary effects going into the second half of the year. However, the EU is likely to see below-target inflation in the January print. 

Central Bank Meeting Calendar 

Technical View 

US 10-year bond yields started to rise slowly in January. Rising trade tensions, shutdown risk, turmoil in Minnesota, high geopolitical risks, and persistent inflation contributed to that. As we stated in last month’s report, 4.30% will be the key level to watch for any breakout. 

Brent crude oil rose in January with Iran risks, questions about the volume of Venezuelan oil that can be pumped into the market, and India lowering imports from Russia. For 2026, upward moves remain selling opportunities, but sharp spikes might happen. A possible Iran strike could lead Brent toward 80 temporarily. 

Precious metals had a historically wild month in January. Silver gains reached almost 70% by January 30 but then fell by the most in a single day in modern economic history, finishing the month with an 18.88% return. Gold moved similarly and finished the month with 12.88%. Platinum and palladium also made very wild swings. Both upward and downward moves gave panic vibes: first a combination of short squeeze and FOMO, then panic profit-taking combined with chain stop triggers. 

Gold ended January with a very sharp sell-off yet still finished the month with a 12.88% return. The extreme price surge of recent weeks has not nearly been taken out yet, but the magnitude of the sell-off could trigger an upward reaction. February could become very hard or very profitable for gold traders because volatility is likely to stay high. 

Silver reacted sharply from the upper line of the long-term logarithmic trend channel that started in 2001. 70 is the immediate support, but throughout the month many upward and downward sharp movements are likely to happen. The main support to watch will be 50. 

The dollar index finished the month below the long-term trendline that started in 2011. Markets will watch whether the dollar is able to recapture the trendline or fails and breaks downward. 

Equities in the US were mostly flat, similar to the DAX. However, the MSCI World index rose 2.19%, showing negative divergence in high-value stocks. 

The VIX stayed low in the first month of the year despite higher risks. If it rises above 20 in the first days of February, the chance of a short-term sell-off will increase significantly as the metals rout raises fears in AI and tech sectors because of similar high-sloped trends. 

The S&P 500 made a couple of moves above 7000 but could not hold it. A rising wedge has formed since the start of November, increasing the risk of a downward correction in the first quarter. A move south of 6800 could trigger a sell-off signal. For the upside, steady pricing above 7000 might be needed to convince traders. 

©Bloomberg 

The FX market continues to feel the weak dollar index. The yen and euro moved almost equally, around 0.5%, while the AUD continues to outperform. Markets expect a divergence with the Reserve Bank of Australia possibly hiking rates, which is pushing the AUD higher. 

EURUSD failed to hold 1.20 but remains above the broken 1.1830-1.1880 zone. If 1.1830 holds, EURUSD might start another attempt on the 1.20 resistance, but a failure could change the trajectory of the pair. 

USDJPY fell with the lower dollar and intervention fears, especially after the New York Fed’s rate check. However, it might be early for yen bulls to celebrate. The market is likely to test how serious the Japanese administration is about its intervention threats.