Market commentary: Feb 2026

Portfolio performance

Our client portfolio returns continue to be strong, but the title of standout performer for the year to 28 February has shifted from international shares to infrastructure (20% for the year and 14% over the last six months). Questions we are pondering include: will the US/Israel attack on Iran be the tipping point for markets? And will optimistic market psychology finally wane? Maybe. We are monitoring the situation, and if the trend turns toward pessimism, we will move our client portfolios to a more conservative setting.

A summary of recent developments and market outlook*

The US and Israel attack on Iran represents the latest challenge to the global economy via elevated energy prices and heightened uncertainty. It joins a host of other recent geopolitical events led by the US military including last year's targeting of Iranian nuclear facilities and this year's US military strike on Venezuela. While neither of these events had a significant impact on share markets, this one may be different.

Aside from geopolitics, AI disruption and private credit concerns continue. A key source of funding for AI companies has come from private credit funds. Investors in these funds are becoming concerned about the amount of lending to AI companies and are withdrawing their capital. This could become a problem for major US banks that provide extensive standby lending facilities to private credit funds.

In yet another twist in the tariff saga, the US Supreme Court ruled President Trump's tariffs illegal in a 6-3 decision, finding that the International Emergency Powers Act did not provide sufficient authority. President Trump responded swiftly, imposing a broad 10% tariff on all imports for up to 150 days under separate trade legislation. Significant uncertainty remains over the fate of the US$142 billion in tariff revenue already collected, with FedEx among the first major companies to sue for a refund.

Closer to home, the Reserve Bank of New Zealand left the Official Cash Rate (OCR) unchanged at 2.25%, reminding markets that the economic recovery remains at an early stage and that stimulatory policy is likely to be required for some time. Bond yields and the New Zealand dollar fell in the immediate aftermath of the announcement, and markets are now pricing in just 0.30% of OCR hikes this year.

Market outlook*

The global macroeconomic environment remains positive, with inflation largely normalised and healthy rates of GDP growth. Inflation in most countries is now within central bank target bands. Improving US and Chinese growth prospects over the past 6-9 months mean that most forecasters expect another year of 3% global growth, which is around trend. This, along with solid corporate earnings, provides a supportive environment for share market returns.

* Source: Harbour Asset Management’s “Harbour Outlook”.

Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFP^CM), Director and Financial Adviser