“Ladies and Gentlemen, Please Fasten Your Seatbelts”
FEBRUARY TURBULENCE
As I mentioned at the beginning of this year, it was my contention that while we might have double-digit returns again in 2026, it would also come with more volatility. January was great until its last day, and in February it was first week up, second week down, third week up, fourth week down.
We are all familiar with the pilot coming over the intercom and saying, “Ladies and gentlemen, please fasten your seatbelts. We may be encountering turbulence.” Dropping 50 feet or bouncing around in-flight isn’t pleasant, but it’s not like plummeting 3,500 feet. The financial equivalent is bouncing between -2% down and +2% up. On February 10th, the Dow Jones Industrial Average (DJIA or Dow) hit an all-time high of 50,188. Two weeks prior to that we were bouncing between 48,000 and 49,500, and two weeks following we have done the same thing.
What is causing this? There are still inflation concerns, the Russian-Ukraine war is still going on with little impact, we just went to war with Iran, uncertainty around the impacts of AI, high valuations for companies with the concentration of tech companies in the major indexes, and slower growth indicators. Even with these uncertainties, there are a lot of positives: a resilient labor market, the likelihood of rate cuts from the Fed, corporate earnings are still holding up, the continued investment in AI, and heavy investments into U.S. manufacturing.
No one can predict where the stock market goes next, but in my opinion, that’s okay if you have a plan for how to deal with it if things go south. Or, in my airplane analogy, do you ride the plane down (buy and hold strategies) or do you pull up (tactical asset rotation). A perfect example of this is our Core Strategy that has been in International Stocks and Gold for over a year now. While US stocks did okay in 2025, they are now sputtering. The Core Strategy was up 27.07% in 2025, while the S&P 500 was up 17.80%. So far in 2026, the Core Strategy was up another 5% in February while the S&P 500 dropped -.60%. For the year this strategy is up +10.51% as compared to the S&P 500, which is up 0.93% year-to-date. More on that in the returns portion of the newsletter.
STATE OF THE UNION
I’ve heard people and read political pundits’ articles that “the country has never been more divided.” As I thought about that, I had to ask myself, “Is that really true?” If you watch cable news or the State of the Union address (more on that below), you might draw that conclusion. However, the “United” States has been significantly divided many times throughout our history. The most obvious time was the Civil War when we had the armies of the North battling the armies of the South. But to bring this closer to the modern era, we could look at the late 1960s and early 1970s.
In the late 1960s, there were clashes over civil rights, feminism, religion, generational change and the war in Vietnam. The draft affected millions of families. Television brought graphic images of the war into American living rooms intensifying public reaction. Large scale protests erupted, including deadly unrest with events like the Kent State shootings and the assassination of Martin Luther King, Jr. The early 1970s brought further distrust of government with the Watergate scandal.
The 2020s has seen many episodes of unrest. The Black Lives Matter movement following the murder of George Floyd in 2020 resulted in $2 billion in arson and destruction damage from protesting turned violent. The 2021 Capitol attack by some of the protesters highlighted those on the extreme opposite side of the political spectrum. Then there are the recent actions by violent protestors in Minneapolis over illegal immigration.
In the 1970s, Americans largely consumed the same news from a handful of networks. This created shared “facts,” even amid disagreement. Today’s digital ecosystem allows Americans to inhabit entirely different informational worlds, increasing mistrust and reinforcing ideological extremes on both sides.
The 1980s and 1990s seemed to usher in an era of peaceful dialogue of differences and politicians, beginning with Ronald Reagan, who projected a positive future and the United States as a “shining city upon a hill,” a beacon of hope, freedom, and opportunity. This continued through the presidencies of H.W. Bush, Clinton, and for the most part George W. Bush.
I would contend that for all the good that the internet provides, it is also a significant part of the division we are experiencing today. If you believe that the main-stream media has a particular ideological bent, then you can bypass them and go straight to sources you trust more. Unfortunately, most people seem to camp out in those areas versus trying to understand the other side by exploring their viewpoints. In an age of money for viewership, you also have both sides of the political spectrum, stoking the flames of distrust and even hatred towards the other. This is one of the reasons I recommend turning off all news, if you want to lower anxiety and your blood pressure.
With all that in mind, President Trump delivered his first State of the Union address of his second term last week. He framed the speech around what he described as domestic strength, economic gains, national security and future policy priorities. Regardless of your political bent or whether you voted for or against President Trump, for investment purposes any President’s State of the Union address provides insight into the direction they are trying to steer the country.
The President highlighted these positives over the past year:
(1) Strong Markets – the stock market reached 53 record highs, positively impacting retirement accounts like 401(k)s
(2) Unemployment remained low
(3) Lower prescription drug prices
(4) Announcement of a new plan to expand retirement savings access for Americans without employer-based plans and the $1,000 contribution to Trump Accounts for every U.S. citizen child born between Jan. 1, 2025 and Dec 31, 2028
(5) Championed energy independence and oil and natural gas production increases. Introduced an initiative to have major tech companies build their own power infrastructure to ease grid pressure and lower costs.
(6) Warned against Iran developing nuclear weapons and pledge to continue strong security measures abroad
(7) Reiterated calls for stronger immigration controls and reforms to election laws and voter integrity, framing them as essential to American sovereignty
Within one week we have already seen action on #6, with the attack on Iran. This will have at least a temporary impact on investment markets. Specific asset classes like gold, energy, defense, could be impacted more significantly to the upside or downside.
In closing, while I have my personal opinions on politics, social issues, immigration policy, etc. I will note that I have been investing for clients for over 30 years through five different Presidents in both parties (several with multiple terms) and you can make money in the stock market under both Democrats and Republicans. It was a lesson I had to learn early on. The way I invest, using relative strength analysis and math, takes the emotions (fear & greed) as well as feelings (social & politics) out of investing.
REVIEW - UPDATE TO THE CORE TARS
Normally, when U.S. Stocks are in the top 3 of our 6 options reviewed each month, we use SPY (S&P 500 index ETF). In the middle of 2023 thru 2025 I utilized SPYG instead of SPY.The S&P 500 Growth ETF (SPYG) places a heavier weighting on technology stocks like NVIDIA, Microsoft, Google, Meta, and Broadcom. From a return standpoint, this resulted in 5-10% better returns each year. No asset class lasts forever, which is why we are dynamic in our investing as opposed to “buy and hold.” What has been borne out in the past 1, 3, and 6 months returns, is that Small Cap Value stocks have rotated into favor over Large Cap Growth.
The new update to the Core Strategy is that when we evaluate the 6 ETFs to determine the 3 we will be in, if SPY (S&P 500 index) is one of the 3, then there will be a further review of the best sub-set of US stocks to invest in. The 4 funds in this sub-set will be IWO for small/growth, IWN for small/value, IWF for large/growth, and IWD for large/value. For those in the Conservative, Moderate Conservative, and Moderate allocations, we will invest 50% in SPY and 50% in whichever of the 4 sub-set funds is the momentum leader.
For Moderate Aggressive and Aggressive allocations, we will invest 100% in the momentum leader of the sub-set funds. Over the past month, SPYG was up +0.52%, SPY was up +1.47%, and IWN was up 6.99%. We don’t chase monthly returns, but as mentioned above the rotation from large growth stocks to small value stocks has been clearly observable in the momentum trend lines.
Beginning in February the change will look like this:
Conservative/Moderate Conservative/Moderate Strategies: Sell SPYG, Buy 50% SPY & 50% IWN.
For Moderate Aggressive/Aggressive Strategies: Sell SPYG, Buy IWN.
TACTICAL ASSET ROTATION STRATEGY (TARS) RESULTS
The Core ETF Strategy is comprised of SPYG (S&P 500 Growth), EFA (International), VNQ (Real Estate), IAU (Gold), IEF (7-10 mo. Treasuries), and BIL (Cash) and are evaluated on a relative strength basis and re-ranked 1 through 6. Clients are in the top 3. Typically, the CORE makes up 30% of a client portfolio. The Core TARS portfolio is designed to share in some of the bull market’s gains, while minimizing (or even preventing) losses during bear markets. “Win by not losing.”
TARS Core followed its outstanding 2025 gain of +27.07% with a huge January gain of +5.93% and then followed it up with an equally impressive return in February. Our move out of SPYG to start February paid off. Instead of being down -3.43%, Conservative, Moderate Conservative and Moderate portfolios were 50% in SPY (S&P 500) and 50% in IWN (Small Cap Value) and Moderate Aggressive and Aggressive portfolios went 100% into IWN. The former were up 4.59% for the month and the latter were up 5.04%. Both are significantly higher than the benchmark 60% stock / 40% bond portfolio (+0.36%), or either of the 60/40 components (S&P 500 Index, -0.60% / Bloomberg U.S. Bond Index, +1.60%). Year-to-Date the Core Strategy is up 10.51% for Conservative, Moderate Conservative and Moderate portfolios and 10.97% for Moderate Aggressive and Aggressive portfolios. This compares to the 60/40 Index up 3.21% YTD and the S& P 500 Index 0.93%. In 2 months, the Core Strategy is up what are typical average annual returns over the past 50 years for the S&P 500. I will definitely interject here that past performance is no guarantee of future returns. Despite this, I am happy that we are on the pace that we are so far this year, especially in light of the turbulence we have experienced.
Unsurprisingly, gold was the biggest driver of this superior performance, as it has been for many months. After gaining +47% last year, its strongest calendar year gain since 1979, TARS's gold (IAU) holding blasted off to a +12.36% gain in January and in February was up another 8.63%.International stocks (EFA) also continue to be an outstanding asset class with a 4.90% return in January and 4.61% in February.
THE CORE STRATEGY
Here was the performance of the three Core asset classes for February1
US Stocks (SPY) - 0.86%
Small Cap Value (IWN)** + 1.89%
International (EFA) -+ 4.61%
Gold (IAU) + 8.63%
*Conservative, Moderate Conservative & Moderate allocations hold 50% SPY and 50% IWN.
**Moderate Aggressive & Aggressive allocations hold 0% SPY and 100% IWN.
There are no changes for February.
SECTOR ETFS
The TARS Sectors that are chosen are based upon the same momentum strategy as the Core ETFs. I evaluate 85 Sectors and we make changes if they fall out of the top quartile.
Biotechnology performed well again in February +2.10%, handily beating the S&P 500, while Aerospace & Defense in the Aggressive Portfolios had an impressive +3.72% return. Both remain in the top quartile.
Here is the performance of the Sector ETFs for February1
Biotechnology (IBT)* + 2.10%
Aerospace & Defense (PPA)** + 3.72%
*Moderate & Moderate Aggressive allocations hold IBT
** Aggressive allocations hold PAA
There are no changes for February.
WORLD ETFS
I evaluate 64 country and world ETFs. Aggressive portfolios hold a 5% allocation to 2 country ETFs and Moderate Aggressive have a 2.5% allocation each.
Both country ETFs performed well in February and remain in the top quartile.
Here is the performance of the World ETFs for February1
Spain (EWP) + 1.69%
Latin America (ILF) + 3.17%
There are no changes for February.
OTHER FUNDS
VYM continues to be a consitent performer and is doing exceptionally well this year, up +7.88% YTD. It is not surprising that the Aegis Small Cap Value fund (AVALX) is doing well, seeing as the Core Strategy had us move out of Large Cap Growth and into Small Cap Value.
Here is the performance of these funds for March3
Vanguard High Dividend Yield Stock Fund (VYM)* -+ 3.39%
Aegis Small Cap Value (AVALX)** + 5.43%
*Conservative, Moderate Conservative, Moderate & Moderate Aggressive allocations hold VYM.
** Moderate Aggressive & Aggressive allocations hold AVALX.
INDIVIDUAL STOCKS
Currently, I only hold individual stocks in Aggressive Growth portfolios. There is a 2.5% allocation to each of the following four stocks for 2025, for a total of 10% of the portfolio. It is a meaningful allocation since the 10% invested in these 4 holdings is the same as what we invest in each of the 3 ETFs in the Core Strategy.
With the volatility in individual stocks and the current investment environment favoring asset class selection, as well as certain sectors and counties, I am moving out of the 4 individual stocks within the Aggressive Allocations (10% of the strategy) and inceasing each of the three Core Strategy holdings by 2%, from 10% to 12%. I will also increase the World ETFs by 2% each, from 5% to 7%. The four individual stocks are up about the same as the S&P 500 Year-to-Date, so this looks like an optimal time to make an adjustment.
Here is the performance of Individual Stocks in February1
Amazon (AMZN) - 12.24%
Walmart (WMT) + 7.39%
Nvidia (NVDA) - 7.29%
Alphabet (GOOGL) - 7.76%
FIXED INCOME ETFS
PAAA (PGIM’s AAA Ultra Short Bond Fund) makes 20% of Conservative allocations, 10% of Moderate Conservative and Moderate allocation, and 5% of Moderate Aggressive allocations. It has a current yield of 5.12%. FLOT floating rate has a 10% weighting in Conservative allocation. PIMCO’s PFN ETF has been swapped out for a less volatile PIMCO Mutual Fund –PIMIX. For Moderate Conservative and Moderate allocations, FLOT has been swapped out for the Guggenheim Macro Opportunities Fund (GIOIX). For those in non-retirement accounts where we are seeking to limit taxable income, I have substituted the Short-term Nat’l Muni (SUB), North Square Tax-Advantaged Professional Income (QTPI), and PGIM Ultra Short Muni (PUSH).
Here is the performance of the fixed income funds in February1
PGIM AAA Ultra Short Bond (PAAA) + 0.24%
PGIM Short Term Muni (PUSH) + 0.49%
Short-term Nat’l Muni (SUB) + 0.32%
Invesco Floating Rate (FLOT) + 0.26%
Guggenheim Macro Opportunities (GIOIX) - 0.16%
PIMCO Income (PIMIX) + 1.24%
North Square Tax-Advantage Income (QTPI) + 0.53%
ALTERNATIVE HOLDINGS
The JP Morgan Equity Premium fund writes covered calls on S&P 500 holdings for additional premium returns yields 8.06%. Real Asset Allocation (RAA) is a diversified asset allocation fund that utilizes the same relative strength strategy as our Core Strategy with the inclusion of not just stocks, bonds, and gold, but commodities, metal miners, managed futures, Bitcoin, TIPS, Emerging Market Bonds, and more. RAA is currently 10-20% of every risk strategy.
Here is the performance of the alternative funds in February1
Real Asset Allocation (RAA)* + 1.98%
JP Morgan Equity Premium (JEPI)** + 2.86%
SummerHaven Dynamic Commodity (SDCI)*** + 1.75%
*All portfolio allocations hold RAA
**All portfolio allocations except for Aggressive hold JEPI
***Aggressive Growth allocations hold SDCI
REFERENCES
Morningstar February 28, 2026 Monthly Returns.
DISCLOSURES
The analysis and commentary in this Market Commentary is general in nature and does not take your personal circumstances into consideration. It is not intended to be a substitute for specific, individualized financial advice and investors should obtain legal, accounting and tax advice from a qualified tax professional, accountant or attorney.
The information provided in this Market Commentary, including any strategies, methodologies, and opinions, is expressed as of the date hereof and is subject to change. EverSource Wealth Advisors, LLC assumes no obligation to update or otherwise revise these materials.
This Market Commentary relies upon historical data, and much of the information presented is not intended to be performance reporting or representation, whether hypothetical or actual. Reports on the performance of various strategies are gross, not net, and do not take into account our fee or various third-party charges such as trading charges. Individual Exchange Traded Fund (ETF) performance in the commentary are monthly returns of all ETFs utilized across client accounts in various asset allocation percentages based upon risk tolerance. They are gross returns and not net of advisory fees. Each client’s returns will vary based upon the percentage of each ETF held, in addition to other variables, such as: allocations to money market funds, additional individual stocks or mutual funds held, and date of entry into each holding.
Actual results will vary from the analysis. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, expressed or implied is made regarding future performance or the accuracy of the information herein.
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