February 23, 2026

 “Tariffs are part of the negotiation. The real trick is going to be increase American exports”.

Wilbur Ross

With all the drama of last week over tariffs, the market moved on. Here are the numbers. The S&P 500 finished up for the week +1.10%, the Dow followed all be it not as strong gaining .99%, the Nasdaq added 1.44%. Internationally led again with the FTSE adding 2.30% and the MSCI-EAFE booked a gain of .99%. The 2-Year treasury paid 3.482% and the 10-year yield was 4.086%.

So, what happened? In a 6–3 decision released on February 20, the United States Supreme Court ruled that President Trump’s use of the International Emergency Economic Powers Act (IEEPA) as a basis for tariffs exceeded his legal authority. The ruling curtails a central component of his economic policy priorities and reinforces boundaries on the use of emergency powers in trade matters. In a lengthy dissent to the U.S. Supreme Court’s decision that struck down President Donald Trump’s tariffs, Justice Brett Kavanaugh insisted the taxes are “lawful” and could be imposed via other means. Meaning the President has a work around which will be more complicated and take some time; however, the Trump Administration seems to have been ready for this and has moved immediately to remedy the situation while the left and Trump haters celebrate. However, the issue is anything but settled. As expected, the Supreme Court didn’t touch the hot potato of how or when corporations might be refunded for some $130 billion in tariffs covered by the ruling, and for now businesses will keep paying them, given a murky timeline for changes to import customs. Several companies (Costco for example) have already filed lawsuits to recover the money paid.

More to the point, Trump condemned the ruling just hours after the news and said he will impose a 10% global tariff under a different authority in Section 122 of the 1974 Trade Act, in addition to existing levies. That shift puts Trump on “much safer legal ground now,” even if Section 122 is more restrictive, notes Capital Economics’ Chief North America Economist Paul Ashworth. As I said it is more complicated and will take time.

The expected result was telegraphed by the market as last Thursdays jitters manifested on the news to last Fridays advance. This week, investors will be watching whether fresh data on consumer confidence, durable goods, and housing, along with ongoing earnings and policy headlines, reinforce the market’s resilience or bring back the stop-and-start volatility that has defined February.

In economic news, The Federal Reserve’s preferred inflation gauge showed that prices rose close to 3% in 2025, leaving the central bank with more work to do to get cost-of-living increases back down to prepandemic lows. The personal consumption expenditures index rose 0.4% in December, the government said Friday in a report delayed by federal shutdowns. The prices of goods are most affected by high tariffs, and they rose sharply in the final month of last year, as some companies tried to pass on their own higher costs to customers. The increase in inflation in the 12 months that ended in December rose to 2.9% from 2.8%. The Fed has been trying for a few years now to reduce the rate of inflation to 2%.

As Market Watch reported, “The economy was hurt in the fourth quarter by the government shutdown The U.S. expanded at a subpar 1.4% annual pace in the fourth quarter of 2025, depressed by a long federal shutdown that caused government spending to plunge. Still, the economy grew at a solid 2.2% rate for all of 2025, a fifth straight year of above-average growth, the latest report on U.S. gross domestic product showed. GDP is the official scorecard for the economy. The economy could turn in an even stronger performance this year. The Federal Reserve has cut interest rates, businesses are pouring money into new technologies, unemployment is low and the effects of tariffs are expected to fade.”

In other significant news, WTI crude oil futures jumped another 1.9% to $66.43 a barrel. President Donald Trump suggested at the inaugural meeting of his Board of Peace in Washington, D.C., that the U.S. will decide whether to strike Iran in the next 10 days. Speaking of strikes the out of news cycle war in Ukraine still has plenty of action. Ukrainian drones struck an industrial site deep inside Russia on Saturday, which a Russian news channel said was a key state-owned missile factory.

The strike came days after the latest U.S.-brokered talks between envoys from Moscow and Kyiv over Russia’s all-out invasion of Ukraine ended Wednesday with no sign of a breakthrough, as the war’s fourth anniversary approaches next week.

A word on housing. Mortgage interest rates dropped last week to the lowest level in a month, prompting more current borrowers to seek savings in a refinance. While lower rates didn’t give potential buyers much incentive, the run on refinances was enough to push total mortgage demand 2.8% higher compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, decreased to 6.17% from 6.21%, with points remaining unchanged at 0.56, including the origination fee, for loans with a 20% down payment.

So, looking ahead after the economy continued to grow fairly rapidly, we expect good things this year as February comes to a close. Why? two chief reasons, Americans kept spending at a surprisingly strong clip, which is expected to continue, (remember it always comes down to how much money people spend in the economy). Although hiring petered out, businesses cut relatively few jobs and layoffs remained near a record low. That gave households the confidence to spend. Wealthier households in particular spent plenty of money, buoyed by the record stock market and rising home values. Families with less income had more of a struggle. The other big contributor to the economy last year and in the coming year was soaring business investment in artificial intelligence — to the tune of hundreds of billions of dollars.

Europe still looks good, value stocks, Small Cap and finally increasing bond maturities to 3-6 years make the most sense now.

Mike