Global markets were mixed in February, with U.S. large caps modestly lower while small caps and emerging markets led returns. The more notable development, however, was continued broadening beneath the surface of equity markets.

Within the U.S., smaller companies outperformed large caps, reflecting improving breadth after several years of narrow leadership concentrated in mega-cap technology. Sector performance reinforced that shift. Cyclical and real-asset-oriented areas such as Energy and Materials were among the stronger performers, while Information Technology and Communication Services lagged as investors rotated away from premium-valued growth stocks.

International developed and emerging markets again outpaced the U.S. Emerging markets’ strength was led by Taiwan and South Korea, where semiconductor manufacturers continue to benefit from global AI infrastructure spending. Notably, this leadership persisted even as the U.S. dollar firmed modestly during the month, indicating that currency effects were not the primary driver of returns.

Bonds did their job in February. Longer-term Treasury yields eased from January’s highs, lifting core fixed income returns and supporting investment-grade corporates. High-yield spreads edged modestly higher, reflecting a slightly more negative risk tone. The Federal Reserve held rates steady during the month, and markets absorbed the nomination of a new Fed Chair with little disruption.

Commodities remained an important theme. Gold continued its strong advance, supported by ongoing central bank demand, fiscal concerns, and portfolio diversification flows. Energy prices held firm amid geopolitical tensions and steady global demand.

A diversified 60/40 portfolio delivered another positive month in February. As leadership broadens across regions and sectors, markets appear less dependent on a narrow group of U.S. growth stocks and more balanced across asset classes.