February 2026

At BlueStem Wealth Partners it is important to us that you are well informed about how we are managing your portfolio. The written commentary below is for the time period ending January 31st, 2026.

U.S. equity markets delivered a mixed but generally positive performance in the second half of January, with major indices posting modest gains for the month. Interestingly, equities were far less volatile than other asset classes in the second half of January, while precious metals, currencies, and commodities saw sharp swings. Gold surged to a record before plunging on January 30th in its largest single-day decline since the 1980s¹. The dollar posted its steepest slide since April’s tariff-driven turmoil amid speculation about intervention to support the Japanese yen, while oil climbed to its highest level since August. Yet the VIX remained below its one-year average, suggesting equity market volatility was concentrated at the single-stock level, driven by earnings reactions rather than broader macroeconomic concerns.

The Federal Reserve held its benchmark rate unchanged at 3.5%–3.75% at its January meeting, following three consecutive rate cuts in the second half of 2025². Fed Chair Powell noted that economic activity continues to expand at a solid pace, though inflation remains somewhat elevated, near 3%³. Markets anticipate one to two additional quarter-point rate cuts by year-end⁴. Adding to the week’s developments, President Trump nominated former Fed Governor Kevin Warsh to succeed Powell as chair when his term expires in May, news that helped lift the dollar. Warsh, who served on the Federal Reserve Board from 2006 to 2011, faces Senate confirmation amid questions about central bank independence. While historically hawkish on monetary policy, his recent statements suggest alignment with Trump’s preference for lower rates.

Four Magnificent Seven companies reported earnings, with the results underscoring a widening divergence: companies demonstrating clear AI monetization are rewarded, while those still in heavy investment phases face investor skepticism. S&P 500 earnings are tracking 11.8% higher year-over-year, marking the fifth consecutive quarter of double-digit growth. Looking ahead, the confirmation process for the incoming Fed chair and further corporate earnings reports will likely shape market direction in the coming weeks.

The bottom line: Despite crosscurrents from mixed earnings results and shifting Federal Reserve leadership dynamics, equity markets demonstrated resilience through January. Strong performances from Apple and Meta offset Microsoft’s disappointment, while the Fed’s decision to pause rate cuts provided near-term clarity on monetary policy. Consumer sentiment improved modestly, suggesting households are gradually adjusting to current conditions even as elevated prices and labor market concerns persist. Rich valuations and pockets of sector-specific weakness still bear watching. Even so, stable policy, solid fundamentals, and improving market breadth provide a foundation for continued progress.

Recent Trade Rationale: If you would like to see a high-level recap of recent changes to the model portfolios, please click on the link to read the February 2026 Trade Rationale. As a reminder, we utilize quantitative techniques to manage the models. Level Elements are designed to manage your model’s equity and fixed income exposure over time. This changes as fundamental, quantitative, and economic data changes. Style Elements are designed to manage what is in those equity and fixed income exposures.

1. Bloomberg
2. Board of Governors of the Federal Reserve System, https://www.federalreserve.gov/newsevents/pressreleases/monetary20260128a.htm
3. Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
4. CME Fed Watch Tool, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

All opinions expressed in this commentary are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable; however, BlueStem Wealth Partners cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. To determine which investments or planning strategies may be appropriate for you, consult your financial advisor or other industry professional prior to investing or implementing a planning strategy. This commentary is not intended to provide investment, tax or legal advice, and nothing contained in these materials should be taken as such. Investment Advisory services are offered through BlueStem Wealth Partners are only offered where BlueStem Wealth Partners and its representatives are properly licensed or exempt from licensure. No advice may be rendered unless a client agreement is in place. The material provided is for informational purposes only and is not meant to be a solicitation or recommendation to buy/sell any security. BlueStem Wealth Partners is an investment advisory firm registered with the Securities and Exchange Commission (“SEC”). SEC registration does not imply a certain level of skill and or expertise.