Overview

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February proved to be a month of notable divergence. While global equities broadly advanced — non-US markets comfortably outpacing their American counterparts —the narrative was shaped less by macroeconomic data and more by a creeping scepticism about artificial intelligence. Investors who had bet heavily on the transformative potential of AI began to question whether valuations had run too far ahead of reality, triggering a meaningful rotation away from high-growth technology names towards businesses offering steadier earnings and tangible near-term cashflows. Government bonds benefited from the ensuing caution, outperforming corporate credit. Geopolitical tensions — including fresh conflict between the US and Iran on the month's final day — cast a long shadow as markets closed for the weekend.

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Equities

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United Kingdom

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The UK was one of the month's standout performers. The FTSE All-Share rallied strongly, with the rotation out of AI-related stocks proving a tailwind for a market less exposed to those themes. Healthcare led the charge — buoyed by solid corporate earnings and a spate of pipeline-boosting deals in the pharmaceutical sector —while basic materials, utilities and telecoms also contributed meaningfully. Large-cap names dominated; the FTSE 250 posted a respectable 2.3% gain but lagged the blue-chip FTSE 100.

The Bank of England held rates at 3.75%, but the tone was markedly cautious. The MPC trimmed its growth forecasts for the next two years, lifted its unemployment projections, and left the door ajar for a cut as early as March. That dovish signal was reinforced by official data: UK GDP expanded just 0.1% year-on-year in Q4 2025, and while inflation eased to 3.0% in January from 3.4% in December, the pace of disinflation remains gradual.

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United States

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US equities had a difficult month. The S&P 500 slipped 0.8% in what proved to be a volatile and increasingly divided market. The long-running consensus around AI-driven growth — priced into some of the market's most prominent names with considerable optimism — began to crack as investors reassessed whether those lofty expectations could ever be met. Capital rotated accordingly.

The clearest beneficiary of this shift was small-cap stocks, which surged 3.9%. After an extended period of underperformance, smaller domestic-focused companies found favour as investors sought more grounded valuations and more immediate earnings visibility. Their limited exposure to mega-cap technology was, for once, an advantage.

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Eurozone

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European equities advanced in February, supported by tentative signs of an economic recovery and a continued flow of capital away from US markets. Energy, communication services and real estate led gains, while healthcare and financials lagged. The latter faced particular scrutiny: investors questioned whether the rapid maturation of AI applications might disrupt wealth management and other financial services — a concern that kept a lid on the sector's performance.

The macro backdrop was more constructive than it has been in some time. The ECB held rates at 2%, with President Lagarde maintaining that inflation is settling comfortably — a view supported by the January CPI reading of 1.7%, its lowest since 2021. Business activity data painted a more optimistic picture too, with the HCOB composite PMI rising to 51.9 in February, as manufacturing hit a six-month high of 52.1. France added a note of political resolution, finally passing its 2026 budget after months of deadlock, with plans to increase defence spending and reduce the deficit to 5% of GDP by year-end.

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Asia

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Asian equities posted some of the strongest gains globally in February, led by North Asian technology-export economies. South Korea, Japan, Thailand and Taiwan all rallied as demand for semiconductors and technology hardware remained robust. China was the notable exception, with domestic growth concerns continuing to weigh on sentiment and pushing its market lower even as regional peers surged.

The sectoral picture across Asia was sharply bifurcated: software declined on disruption fears, but hardware, equipment and semiconductor names more than compensated, attracting investors focused on the physical infrastructure underlying AI, data centres and electronics supply chains.

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TPP Performance Update — February 2026

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February was another strong month for TPP clients, with our strategies delivering an average gain of 2.92% across portfolios. Building on the 1.85% recorded in January, this represents continued positive momentum to open the year.

Standout performances came from several of our individual strategies. Active 2.5 led the way with an impressive 8.2% return for the month. FTSE Tech Entry continued its fine form, adding 8.0% to follow up the 2.8% it delivered in January. CAC Tech Entry was close behind at 7.7%, while American Alpha rounded out a strong group with a gain of 6.7%. Exceptional results from each of these strategies, and a testament to the team's work.

Also worth highlighting were two of our trackers and hybrids. Our leveraged FTSE tracker had an outstanding February, returning 11.4%, while the Euro 600 hybrid added a solid 5.4%.

Looking ahead, March has opened with a rapidly shifting geopolitical backdrop, with tensions in the Middle East continuing to escalate. As ever, TPP is positioned to respond decisively to whatever the market presents. At the time of writing, the majority of client portfolios are holding significant cash and are deliberately underweight equities — a considered, defensive stance that reflects our reading of the current environment. Capital is actively earning interest while we wait for the right opportunities.

TPP's active management approach has served clients well so far this year, and we remain disciplined in our outlook. Caution is our guiding principle right now, but we are alert and ready.

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