Monthly Market Analysis February 2026

Economy

Tariff Update

On February 20th, we finally got a ruling from the U.S. Supreme Court on the legality of Trump’s Tariffs enacted under the International Emergency Economic Powers Act (IEEPA). The U.S. Supreme Court ruled that the President does not have the authority to levy tariffs under IEEPA. The U.S. government will no longer collect IEEPA tariffs starting February 24th, 2026. It is expected that U.S. companies that have paid tariffs under the IEEPA legislation will sue the U.S. government for a refund. (For the economic impact of Trump’s tariffs see note at the bottom of this article).

United States

After losing -140,000 jobs in October and generating less that 50,000 jobs in November and December, the U.S. labour market improved by 130,000 jobs in January. Further evidence of a rebounding labour market could also be found in the U.S.’ January unemployment rate declining from 4.4% to 4.3%. 

The growth rate of the U.S. economy as measured by GDP shifted lower in the last quarter of 2025. The GDP growth rate in the last three months of 2025 fell from 4.4% to 1.4%. Economists suspect that the government shutdown in November is partially responsible for the slower growth.

The latest reading on consumer spending in the United States is based on December. Retail sales in the month of December were flat (0%), which suggests that American consumers did not spend lavishly on their Christmas gifts.

Unexpectedly, the U.S. inflation rate fell from 2.7% to 2.4% in January. The inflation rate continues to remain above the Federal Reserve’s 2% target which influenced a majority of the members of the Federal Reserve Board to hold interest rates at the current 3.75% level, when they met on January 28th. 

Canada

In the last quarter of 2025, the Canadian economy declined. GDP fell at a rate ​of -0.2% in the fourth quarter of 2025, compared to a positive, growth rate of 0.6% in the third quarter of 2025. The drop in the fourth quarter GDP growth rate was driven by a decline in business inventories. 

In January, the Canadian labour market lost -24,800 jobs, reversing a trend of strong job growth over the previous three months. The Canadian labour force participation rate fell from 65.4% to 65% indicating that a lower number of Canadians were actively looking for work. A lower percentage of the Canadian population looking for work resulted in the unemployment rate falling from 6.8% to 6.5%.

Canadian consumers picked up their spending in January as retails sales grew by1.5%.

The Canadian inflation rate gradually decreased from 2.4% to 2.3% in January, moving closer to the Bank of Canada’s 2% target rate. During their January 28th meeting, the Bank of Canada kept interest rates at 2.25% for the third consecutive meeting.

Markets

Global Stock Markets

From January 15 to February 15th, the U.S. Market (S&P 500) fell by -1.56%, while the Canadian market (S&P/TSX Composite Index) improved marginally by 0.14%. The U.S. Nasdaq Composite index which contains a high weighting of technology related stocks decreased by -4.18%. The German stock market (Dax 40 index) fell by -1.97%. The Chinese market (Shanghai Composite Index) declined by -0.74% and the Indian market (Nifty 50 Index) fell by -0.87%.

Change in Global Stock Markets January 15 – Feb 15, 2026

Source: FactSet® 

In, February, we have seen a continuation of U.S. equity market volatility. The primary driver of market volatility has been investor concerns about the impact of artificial intelligence on specific industries. Investors have speculated that AI will eliminate the need for many of the services offered by software and financial companies, among other industries. Investors are also concerned about the cost effectiveness of AI when considering the billions of dollars being spent by many of the largest technology companies, such as Facebook, Microsoft, Amazon, and Google.

The recent ruling on the illegality of Trump’s tariffs has not had a major impact on equity and bond markets, since many market participants had already expected the Supreme Court to rule against the tariffs. The Trump administration responded to the ruling by announcing new tariffs based on a different law, which has created some confusion for companies importing goods into the U.S.

Markets are digesting a wide range of factors currently: the impact of AI, and the cost of AI infrastructure; recent economic data showing a slowing U.S. economy, and a relatively weak U.S. labour market; U.S. inflation that remains above target; a U.S. Federal Reserve that is divided between cutting interest rates or holding them at their current levels; and ongoing geopolitical concerns in Iran, Ukraine, Palestine, and several African countries. 

U.S. Market volatility is likely to persist. It is possible to see a positive upward market shift develop in the coming month; dependent on a relatively strong U.S. job report (March 6th), a dip in the next U.S. inflation reading (March 11th) or an interest rate cut by the U.S. Federal Reserve (March 18th). 

​Equity markets outside the United States have seen strong returns in 2025 and 2026, as market participants look for opportunities in economies with lower priced stocks.

Economic/Market Expectations
	1-3 Months	3-12 Months	Rating Scale
Market Sentiment United States	6	6	1  (Negative) –> 10 (Positive)
Market Volatility United States	6	6	1 (Low)  –> 10 (High)
Economic Growth United States	6	6	1 (Weak)  –> 10 (Strong)
Economic Growth Canada	​5	6	1 (Weak)  –> 10 (Strong)
Economic Growth Europe	5	6	1 (Weak)  –> 10 (Strong)
Economic Growth China	7	7	1 (Weak)  –>10 (Strong)
​Trumps’ Tariffs Global Annual GDP Growth Rates after Trump’s Tariffs   Declining Economies (among the six economies in our tracking)

Change in Economic Growth after Trump’s Tariffs
United States	-0.3%
Canada	-1.8%
China	-0.9%
Japan	-1.2%

Global Economic Growth (Annual GDP Growth Rate) – 1 Year Chart  (*Dotted line shows the start of Trump’s Tariffs, February 4th)

The U.S. economy’s (blue) annual growth rate declined from 2.5% to 2.2%. The Canadian (red) annual economic growth rate declined from 2.3% to 0.7%. China’s annual economic growth rate (brown) fell from 5.4% to 4.5%. The Japanese annual economic growth rate (yellow) declined from 1.30% to 0.10%. The Eurozone’s annual economic growth rate (green) increased from 1.2% to 1.3%. India’s annual economic growth rate (purple) improved from 6.4% to 7.8%.

Global Annual Inflation Rates after Trump’s Tariffs

Rising Inflation  (among the six economies in our tracking) 

Economies with Rising Inflation after Trump’s Tariffs
Canada	+0.4%

Global Inflation Rates (Annualized) – 1 Year Chart  (*Dotted line shows the start of Trump’s Tariffs, February 4th)

Since Trump’s Tariffs were implemented the inflation rate for all the tracked economies have moved lower except Canada. Canada’s inflation rate (red) increased from 1.9% to 2.3%.The United States’ inflation rate (blue) declined from 3.0% to 2.4%. China’s inflation rate (orange) Decreased from 0.5% to 0.2%The Eurozone inflation rate (green) fell from 2.5% to 1.7%.  Japan’s inflation rate (yellow) decreased from 4.0% to 1.5%, and India’s inflation rate (purple) fell from 4.26% to 2.75%.

Trump’s Tariffs Note:

Additional tariffs on goods imported into the United States are expected to increase prices for American consumers and cut into the profits of American businesses. Nevertheless, the Trump administration has decided to utilize tariffs to achieve their priorities. 

1. Tariffs are being implemented to encourage companies to manufacture their products in the United States. The Trump administration expects that companies will eventually produce their products in the United States to avoid tariffs.

2. The revenue from tariffs will be used to help pay for the One Big Beautiful Bill Act, passed on July 4^th, 2025. The One Big Beautiful Bill act extends expiring tax reduction legislation, which was originally enacted in 2017 during Donald Trump’s first administration, along with other Republican Party priorities. The Congressional Budget Office estimates the cost of extending the 2017 tax cut legislation for ten additional years will be over $4 Trillion Dollars.

3. Tariffs on U.S goods are being implemented to help eliminate the American trade deficit with other countries. The U.S. tariffs will be used as leverage to coerce other countries to lower their own tariffs and non-tariff barriers.

4. Tariffs are being used as punishment for countries that refuse to carry out American demands on a range matters unrelated to trade.

Trump’s Tariffs Implemented in 2025

• 35% tariff on Canadian Goods (Except goods covered under the Canada-United States-Mexico trade agreement). Negotiations ongoing.
• 20% tariff on Chinese goods. Negotiations ongoing.
• 15% tariff on Japanese goods. Trade deal framework agreed upon
• 10% tariff on United Kingdom goods. Trade deal framework agreed upon.
• 15% tariff on European Union goods. Trade deal framework agreed upon.
• 15% tariff on Swiss and Liechtenstein goods. Trade deal framework agreed upon.
• 50% tariff on Indian goods. 
• 25% tariff on Mexican Goods (Except goods covered under the Canada-United States-Mexico trade agreement).Negotiation deadline has been extended.
• 50% tariff on all iron, steel, and aluminum imports into the United States except for the United Kingdom and Russia which are tariffed at 25% and 200%, respectively.
• 50% tariff on copper imports into the United States.
• 25% tariff on automobiles and automobile parts into the United States, except for the United Kingdom and the European Union which are tariffed at 10% and 15%, respectively.
• 25% tariff on heavy duty trucks and 10% tariffs on all busses imported into the United States.
• 10% tariff on timber and lumber.
•  25% tariff on upholstered furniture, vanities, and cabinets.
• 10% tariff on all Canadian and Mexican potash imported into the United States that is not covered under the Canada-United States-Mexico trade agreement. 
• 10% – 41% tariffs on all other trading partners based on the size of their trade deficit with the United States.

Conditions under which Trump’s Tariffs will be Lowered or Eliminated