Portfolio Manager Commentary

March 1, 2026

Economic Outlook

The Atlanta Federal Reserve currently estimates real GDP growth of 3.0% for Q1 2026, suggesting continued underlying economic resilience. Meanwhile, the U.S. Leading Economic Index declined 0.2% in December, extending its modest downward trend in recent months. The ISM Manufacturing PMI registered 52.4 in February, its second consecutive month in expansion. Consumer sentiment improved, with the University of Michigan Index posting a final February reading of 56.6, its highest level since August 2025. Producer prices rose 2.9% year-over-year in January, slightly above estimates. The 5-year breakeven inflation rate fell to 2.4% at the end of February, following a 0.25% increase in January. Housing conditions remain stable but subdued, with the NAHB Housing Market Index registering 36 in February. The average interest rate for a 30-year fixed-rate mortgage was approximately 6.09% as of February 20, reaching a recent cycle low.

Fixed Income

The federal funds target range remains at 3.50%–3.75%, while market pricing continues to reflect a gradual easing path over the coming year. The next FOMC meeting is scheduled for March 17-18, and future markets are pricing in no change in the federal funds target range. The 10-year TIPS yield is 1.77%, placing it toward the lower end of the range observed over the past year and indicating some easing in real long-term financing conditions. The yield curve has steepened modestly in recent months, with the spread of 10-year to 2-year Treasury yields reaching 0.74% in February. This represents the largest spread since January of 2022. Measures of interest rate volatility have also moved modestly higher this year, with the ICE BofA MOVE Index rising after briefly reaching a four‑year low in January.

Yield Curve

Current Generic Bond Yields

Equities

Several U.S. equity indices have continued to post gains this year, supported by stronger‑than‑expected corporate earnings results. Market breadth data shows that approximately 40% of Technology stocks are trading above their 200‑day moving average, indicating narrower participation within the sector. However, new leadership has emerged across the market as five of the eleven S&P 500 sectors have already gained over 10% in 2026. Taken together, the current equity environment is characterized by improving earnings growth alongside greater variability in individual stock performance.

In 2026, the best performing U.S. sectors have been Energy (+25.22%), Materials (+17.82%), and Consumer Staples (+16.26%). The worst performing sectors have been Financials (-6.03%), Information Technology (-5.51%), and Consumer Discretionary (-3.76%). On a total return basis, the Russell 1000 Growth Index returned -4.82%, while the Russell 1000 Value Index increased 7.28% over the same period.