Snow gathers on a Wall St. sign during a powerful winter storm that forced school closures and pushed offices and transit systems onto emergency schedules, in New York City, U.S., February 23, 2026. REUTERS/Brendan McDermid
Index Performance
U.S. broad-based indices finished inched higher into greener pastures. The Nasdaq ticked up 1.51%. The S&P 500 Total Return Index climbed 1.11%, followed by the Russell 2000 (+0.67%), and Dow Jones Industrial Average (0.29%).
Broad-based fixed income indices ended the period with mixed results across the board. The FTSE Municipal Tax-Exempt Investment Grade Bond Index rallied 0.20%, and the FTSE High Yield Total Return Index ticked 0.16% higher. The FTSE U.S. Broad Investment Grade Bond Total Return Index dipped 0.09%.
Macro Viewpoint
What a harrowing escape! Real GDP increased at an annual rate of 1.4% in the fourth quarter of 2025, well below the Reuters consensus estimate of 3.0%. The softer-than-expected outcome was driven largely by a sharp deceleration from net exports of goods and services (from 1.62% to 0.08%), while government consumption expenditures and gross investments were meaningful detractors (from 0.38% to -0.9%), alongside a moderate decline in personal consumption expenditures (from 2.34% to 1.58%).
Gross Private Domestic Investment helped limit the downside spiral, rising to 0.45% from 0.15%, highlighting better underlying firmness even as the headline growth declines. The weaker-than-expected GDP was broadly anticipated given the lengthy government shutdown and elevated trade certainty around tariffs. This week’s inflation data was gathered by the Personal Consumption Expenditures Index (PCE) was less constructive. The PCE price index and core PCE both rose 0.4% month-over-month. On a year-over-year basis, the PCE price index increased 2.9%, while core PCE rose 3.0%, signaling that additional intervention is needed by the Fed.
On the Yield Front
Yields rallied following the economic news. The two-year Treasury yield climbed 7 basis points (bps), the five-year increased 5 bps, and the 10-year remained relatively unchanged with a marginal gain of 1 bp. On the other hand, the 30-year yield remained resilient and inched up 1 bp.
Fund Flows by Asset Type
At the close of the LSEG Lipper fund flows week ending February 18, 2026, equities are back in lead. Equity demand rebounded meaningfully this week, with equity funds taking in $12.1bn in net inflows after $327m in outflows the prior week. Inflows were broad-based, led by Developed International Market Funds ($4.4bn), U.S. Sector Equity Funds ($2.2bn), U.S. Multi-Cap Funds ($2.7bn), and Emerging Market Equity Funds ($2.1bn). U.S. Money Market Funds also returned to positive territory, posting $12.7bn in net inflows, a stark difference between the $25bn outflows the prior week. The equity flow profile indicates a shift in investor sentiment and a modest rotation into non-U.S. equity exposure as investors seek to broaden their opportunity set beyond domestic markets.
Within the fixed income universe, momentum is steady, as fixed income funds hit their seventh week of positive inflow, recording $9.6bn in net inflows, with $8.3bn driven by U.S. Taxable Bond Funds. Investors are still seeking shelter in U.S. Short/Intermediate Investment Grade Debt Funds and U.S. General Domestic Taxable Fixed Income Funds, which attracted $3.6bn and $2.6bn, respectively. U.S. Alternative Bond Funds, U.S. High Yield Funds, and U.S. Emerging Market Debt Funds were the laggards for the period posting outflows of $580m, $172m, and $132m, respectively. Municipals gained $1.2bn in net flows, extending their winning streak to 13 consecutive weeks.
Commodity Funds lose steam as Precious Metals Funds face steep drawdowns amid cooling momentum, posting $2.1bn in net outflows. Alternative Funds also moved lower facing outflows of $29.8m, and U.S. Mixed-Asset Funds remained under pressures, posting $410m in net outflows.
