Comments based on information available as of 6:00 am CT on 2/20/2026
Growth: A Broadening, but Stumbling, Bull
The US economy continues to defy gravity, even if the stock market has had a few recent setbacks. Second-half 2025 growth was strong, and corporate earnings were even stronger. While earlier February trading saw brief volatility and jitters around software valuations, market leadership is showing healthy signs of broadening out across energy, materials, and industrials. Those are considered “cyclical” areas that tend to do well when the broader economy does well. However, artificial intelligence agents taking the lunch money of different firms, combined with the Fed causing confusion over their rate-cut trajectory, will likely keep investors on their toes. Even a charging bull can stumble sometimes.
Inflation: A Cyclical Squeeze
While headline CPI cooling to 2.4% looks like a macroeconomic victory on the surface, it could be masking a brutal microeconomic reality. The era of effortless price hikes is over as companies confront an exhausted, highly price-sensitive consumer who simply refuses to absorb further cost increases. With underlying input pressures still simmering, businesses are increasingly forced to swallow these expenses rather than pass them along to the end buyer. As we move through 2026, this dynamic could ruthlessly separate those companies with wide moats from those that are far more vulnerable to margin compression.
Policy: The Fed’s Hawkish Plot Twist
The crosscurrents of solid economic momentum and lingering inflation risks were on full display in the FOMC minutes released this past week, which contained a noticeably hawkish twist. Investors might not believe the changed storyline, though, as the market reaction was relatively muted. While the committee voted to hold the federal funds rate steady at 3.50%–3.75%, the real headline was the revelation that several policymakers are explicitly keeping the option of rate hikes on the table if inflation stalls above the 2% target. This confirms that the easing cycle is firmly paused. The Fed is attempting to navigate the increasingly narrow tightrope between a historically resilient labor market and inflationary wildcards, but the threat of a hike could ultimately be hollow. It would entirely depend on inflation progress stalling or reversing, which probably shouldn’t be anybody’s near-term base case.
Looking Ahead: Buckle Up
If the Fed’s hawkish posturing is more for attention than an intention, the real danger for investors isn’t rising borrowing costs—it’s the fickle nature of sentiment. The macro picture might look stable enough to keep investors on course, but the abrupt changes in sentiment can create plenty of potholes and speedbumps on the ride.
