Key Takeaways
- Markets are holding up despite geopolitical turmoil, but the outlook is shifting toward stagflation (slow growth + higher inflation).
- Volatility is high, and patience (not overreacting) is often the best strategy.
- Equity leadership is rotating from tech into defensive sectors, while international markets are gaining favor.
- In fixed income, cash is preferred over long-term bonds, and stress is emerging in lower-quality credit.
- Commodities and real assets are the key opportunity, supported by rising energy demand and inflation.
- Long-term growth themes include AI infrastructure, robotics, and energy (especially nuclear).
- Overall strategy: stay diversified, risk-aware, and positioned toward value, quality, and alternatives.
The Resilience of the Markets: The US engaged in war with Iran, after capturing Maduro and hinting at a takeover of Cuba, while at the same time, Russia continues to pound Ukraine. Despite all the exogenous risks of war, a slowing economy, and a weaker labor market, equities have avoided large drawdowns, and credit markets have remained fairly stable amid higher yields, driven by inflation expectations tied to the costs of the war in the Middle East. History shows that financial markets rarely reflect the negative impacts of heightened geopolitical risk. Currently, we are placing more weight on the possibility of economic stagnation rather than a full-out recession. This means higher pressure on overall prices and continued slow economic growth, a scenario historically not favorable to equities or bonds, but rather to commodities and real assets.
Sometimes it's Better to do Nothing: Wildly gyrating markets or high daily volatility are usually a kneejerk reaction to unexpected news. History will show that with markets this noisy (look at crude oil prices recently), many times it is prudent and certainly an active portfolio management decision to do nothing until the dust settles.
Future Flows - Innovation: We are constantly monitoring and managing risk in our portfolios while also researching and pursuing new, longer-term growth opportunities. A few examples include photonics as a key element in the build-out of AI infrastructure, drone technology, robotics, and anything connected to the insatiable demand for energy, including alternative sources such as nuclear power that depend on uranium.
EQUITIES
Total US equity returns were flat in February, but with divergent results across factors, sectors, industries, and even individual stocks (high dispersion). The winners have been the beneficiaries of the continued rotation out of technology stocks and into more defensive sectors such as utilities, energy, materials, and consumer staples. Overseas markets posted strong returns for the month as larger flows moved out of US equities and into both developed and emerging non-US markets, prompted by more attractive valuations and selective opportunities in energy and defense sectors.
Macro risks currently overshadow long-term fundamentals, as evidenced by higher intraday volatility and traders' daily reactions to shifting narratives surrounding the war in Iran. Higher inflation expectations, driven by higher oil prices, have hurt equities amid increased volatility.
We continue to be fully invested and broadly diversified across a spectrum of US and non-US equities, with a bias toward quality and value, and broader participation across market capitalizations.
FIXED INCOME
Bond market returns were slightly higher across the maturity spectrum, but flat or slightly negative for lower-grade credits. The war in Iran has sent jitters to investors seeking safety, not into longer-term Treasuries, but into cash and cash equivalents. This action reflects the market’s expectation of higher inflation and higher interest rates ahead. There also continues to be emerging stress in the private credit markets due to higher rates and limited liquidity.
ALTERNATIVE ASSETS
We continue to emphasize risk management and liquid hedges to equity and credit risk. Our current focus is on commodities, specifically long/short managed commodities. This is due to the high dispersion among investable assets in the space, creating a strong opportunity for active management while still providing a solid hedge against traditional assets. Precious metals, industrial metals, and rare earth materials are all critical components of the high-energy-demand buildout for technology.
MARKET PERFORMANCE AS OF February 28, 2026
DISCLOSURES
The statements herein are based upon OAR Financial LLC's (OAR Financial) opinions and the data available in the publication. They are subject to change at any time without notice. This communication does not constitute investment advice and is for informational purposes only. It is not intended to meet the objectives or suitability requirements of any specific individual or account. It does not guarantee that any model's investment objective will be met. Investors should assess their investment needs based on their financial circumstances and objectives. I think neither the information nor any opinions expressed here should be considered a solicitation or a recommendation by OAR Financial or its affiliates to buy or sell securities or investments or hire any specific manager.
OAR Financial prepared this Update utilizing information from a variety of reliable sources, including, but not limited to, custodians, mutual fund companies, investment managers, Morningstar, Bloomberg, other third-party service providers, and, in some cases, as directed by the client or their representative.
It is important to remember that risks are inherent in any investment and that there is no assurance that any investment, asset class, style, or index will provide positive performance over time.
Diversification and strategic asset allocation do not guarantee a profit or protect against a loss in a declining market.
Past performance is not a guarantee of future results. All investments are subject to risk, including the loss of principal. You can change the portfolio positions anytime; your portfolio may not reflect the information referenced.
"OAR Financial, LLC is a registered investment adviser with the SEC. SEC registration does not constitute an endorsement of the Firm by the Securities Exchange Commission, nor does it indicate that the Adviser has attained a particular level of skill or ability."
For more information about OAR Financial, please refer to OAR Financial's website, www.OAR Financial.com, or call us at 833-662-6346.
The information presented in this commentary is the opinion of the author and does notreflect the views of anyother person or entity unless specified. The information provided isbelieved to be reliable and obtained fromreliable sources, but no liability is accepted forinaccuracies. The information provided is for informationalpurposes and should not beconstrued as advice. Advisory services offered through Knode Wealth Management,L LC, aninvestment adviser registered with the State of Texas.
