What doesn’t kill markets makes them stronger

23 February 2026

AT A GLANCE

Last week was highly volatile, fuelled by macro data, geopolitics, and renewed uncertainty on US tariffs
Yet, most asset classes ended in positive territory with the exception of the safest bonds
The week ahead is light on macro data with Nvidia’s results and Washington decisions in focus

It was another highly volatile week, despite numerous market holidays (the US Monday, the Lunar New Year across Asia). The quantity and variety of data and events was simply massive. In terms of top-down, US industrial production and durable orders were positive, as well as global flash PMIs However, US Q4 GDP growth disappointed at only +1.4% annualized, way below all estimates. Still, core PCE inflation was steady. Finally, the week ended with the US Supreme Court ruling than most of the trade tariffs from last year were illegal. The US administration immediately reacted by using another legislative path to impose a global tariff rate of 10% on Friday, raised to 15% the following day. Meanwhile, after initial constructive feedback from the negotiations between Iran and the US in Geneva, President Trump set a 15-days ultimatum and said he doesn’t rule out limited strikes anytime.

That is objectively a lot to digest for market participants. Yet, most asset classes ended the week on a positive note. First, the dollar logically rebounded, up +0.9% and now only down -0.5% against trade weighted counterparts. Most US Treasury yields logically rose, in an orderly and reasonable way. Finally cyclical assets gained, from global stocks to global commodities. For the latter, while gold has continued to top returns at +18%, it wasn’t the star of last week. Silver plunged -8% before rallying +17% and print a 9% weekly gain – with stunning volatility. Brent crude gained +6%, propelled by the combination of supportive activity indicators and rising geopolitical tensions.

Markets and investors are simply getting used to deal with uncertainty. Our positioning is unchanged, fully invested with an overweight on emerging assets and gold, against some caution on hedge funds and safer bonds. Returns are fine so far. The week ahead will be light in macro data but focus will be on Washington policy and geopolitical decisions, as well as on quarterly results from Nvidia on Thursday.

Rate cut(s) ahead, for good and bad reasons

Cross-asset Update

The past week was data-rich and confirmed that the growth-inflation trade off remains favourable, both globally and in particular in the United States. US Q4 GDP was deceptively weak, as underlying domestic demand turned out to be quite solid; likewise, the US PMI pointed to a slowdown on the surface, while expectations for output one-year ahead recorded a 13-month high. Inflationary pressures remained sticky, though in absolute terms manageable. Overall, broadening growth and acceptable price pressures should bode well for risk assets. A similar signal came from Europe: the PMI flagged economic resilience despite tariffs and the strong euro. So far this year cyclical themes have been shining, and this trend is expected to continue. Both emerging market and non-US equities, smaller companies, and basic resources have outperformed year-to-date. After the multi-year outperformance of growth stocks, cyclicals are still relatively cheap despite the recent rally hence we see more upside potential for them.

Investors were surprised by the hawkishness of the Fed’s minutes, as most officials saw risks of persistent inflation and the ones related to employment moderating. Yet, Kevin Warsh, Trump’s nominee and expected to replace Powell from May this year, seems determined to cut rates anyway. He has been on the record to have said that strong economic growth should not be a deterrent for rate cuts given that productivity gains from AI adoption would be keeping price pressures at bay. He might be right, he’s yet willing to take a big risk considering that persistently higher productivity is far from assured. There is a trade off in this respect: more gains for equities in the shorter term, though rising inflation risks down the road if AI fails to live up to expectations. Inflationary pressures are sticky and cutting rates in a rising commodity cycle seems to be quite a recipe for a policy mistake.

Though markets are fine, we live in a dangerous new world, marked by rising geopolitical tensions, as the recent US military buildup in the Middle East demonstrates. And when seeking a hedge, we all look to gold. The yellow metal has been rising steadily into a blow-off top that has seen it way overbought technically, also overshooting money supply in the process. While we remain structurally bullish on gold, we hold the view that more range-trading would be required before we can witness a resumption of the bull market. The imminent geopolitical risks will be an interesting test for the yellow metal.

Rate cut(s) ahead, for good and bad reasons

Fixed Income Update

The biggest market moving event of last week happened on Friday as the Supreme court of the USA struck down President Donald Trump's sweeping global tariffs in a 6-3 decision, delivering a major legal defeat to a cornerstone of his economic agenda. The US government could owe more than $175 billion in refunds to importers after the Supreme Court ruled that tariffs unilaterally imposed by President Trump are illegal. Any potential tariff repayment would be unlikely this year and could be delayed into future years due to the legal uncertainties. US long-end yields went up post this as the Treasury curve bear steepened. Federal Reserve officials appeared surprisingly wary of cutting interest rates when they met last month, with several even suggesting the central bank may need to raise rates if inflation remains stubbornly high. The minutes showed most of the Federal Open Market Committee believed last year’s labour market weakness, which prompted the central bank to lower rates three times in late 2025, was fading by late January.

Saba Capital Management and Cox Capital Partners announced cash tender offers for shares in non-traded business development companies owned by Blue Owl Capital, following a rough week for the alternative investment firm. The offers are expected to be priced at a discount of as much as 35% to the most recent estimated net asset value and dividend reinvestment price. More than 15% of US technology leveraged loans were marked at distressed levels by the end of last week, up sharply from 9.6% at the beginning of the year. Technology surpassed basic industry to become the most distressed sector in the Bloomberg US Leveraged Loan Index. According to JPM, AI related debt has crossed 15% of the JULI index post the recent bout of issuance, increasing the vulnerability of the IG index.

High yield bonds showed positive performance with spreads also tightening. The OAS narrowed from 279.9 basis points on February 17 to 271.4 basis points by February 20, a tightening of approximately 8.5 basis points. The 5-day total return as of February 20 was +0.18%, outperforming investment grade. EM Debt and IG index spreads traded tighter by only 1 to 3 bps. The renewed tariff uncertainty doesn’t bode well for DM corporate credit.

After a quiet couple of weeks, the GCC primary market has opened again. The Commercial Bank (CBQ) and Omniyat are out in market. CBQ (rated A2/A-/A by M/S/F) has announced a mandate for an unrated perpetual non-callable 5.5-year AT1 bond. The bank currently has an outstanding $500Mn perpetual bond which has a call date in March 2026. From UAE, Omniyat (rated -/BB-/BB- by M/S/F) has announced a mandate for a 5-year sukuk, which is expected to price on Wednesday. During FY25, Omniyat reported sales of around AED 15Bn (AED 4.5Bn in FY24) and had a revenue backlog of AED 19.6Bn, which supports revenue visibility for near-term. In FY25, Omniyat recognized revenue, gross profit, adjusted EBITDA, and net profit of AED 4Bn, AED2Bn, AED 1.5Bn, and AED 1.1Bn. The Cash & cash Equivalents of company stand at AED 4.7Bn which includes escrow balance of around AED 2.4Bn.

Rate cut(s) ahead, for good and bad reasons

Equity Update

Equities closed the week higher, not because the environment was calm, but because the market chose to look through volatility. The Supreme Court’s decision to strike down President Trump’s sweeping global tariffs provided the final catalyst on Friday, with the S&P 500 rising 0.7% on the day and finishing the week up 1.1%. Investors interpreted the ruling as a reduction in near-term trade escalation risk rather than a wholesale shift in policy direction. The administration quickly indicated it would explore alternative legal avenues, which means the trade framework is evolving rather than disappearing. For equities, that distinction mattered. The probability of abrupt margin pressure declined, and that was enough to support risk appetite into the close.

At the global level, MSCI ACWI gained 1.0%, with developed markets up 1.1% and emerging markets advancing 0.8%. The US rally was not solely a Friday phenomenon. Earlier in the week, gains were driven largely by company-specific developments, and the market managed to advance despite rising geopolitical tensions between the US and Iran that briefly unsettled sentiment midweek. The ability to absorb those crosscurrents without a sustained drawdown reinforces the broader tone of positioning, which remains constructive. Technology played a central role in performance with the Magnificent Seven advancing 2.5% over the week, carrying a significant share of the broader market’s gains. Reports illustrated that mega-cap technology stocks are the most under-owned relative to their S&P 500 weightings in 17 years, a positioning dynamic that leaves scope for incremental buying if upcoming results validate the growth narrative. That context places Nvidia’s earnings on Wednesday at the center of the near-term outlook. Analysts are looking for reassurance that data center funding remains intact and any remarks on corporates AI spending. Recent corporate developments however underline the ongoing scale of commitment to AI. Nvidia is reportedly nearing completion of a $30 billion equity investment in OpenAI, replacing a previously discussed infrastructure framework, while Meta is aggressively reallocating capital toward AI with projected 2026 capital expenditure between $115 billion and $135 billion. The spending is real and significant. What the market now demands is confirmation that revenue growth and profitability can keep pace with that capital intensity, particularly with valuations elevated.

Europe delivered the strongest regional performance, with MSCI Europe up 2.2% for the week. The gains were built earlier in the week, supported by earnings resilience and improving activity data rather than Friday’s US court ruling. Within Asia, Mainland China was closed for much of the week, compressing activity into offshore trading in Hong Kong, where MSCI China declined 1.0% as technology shares struggled to sustain momentum after reopening. Japan’s TOPIX slipped 0.3%, reflecting some relief post a powerful rally on PM Sanae Takaichi’s victory.

The week ultimately showed that equities remain resilient when earnings visibility holds and positioning is not stretched. A major legal decision reduced one layer of trade risk, geopolitical tension failed to trigger sustained de-risking, and mega-cap technology positioning remains lighter than index weights would suggest. Nvidia’s report now becomes the focal point. A strong result would reinforce the durability of the AI cycle and support further upside. A weaker tone would test how much optimism is already embedded in global equity indices near their highs.

Rate cut(s) ahead, for good and bad reasons

Written by:

Maurice Gravier Chief Investment Officer , [email protected]
Nawaf Alnaqbi Head of Equity Strategy , [email protected]
Satyajit Singh Fixed Income Analyst , [email protected]
Giorgio Borelli Head of Asset Allocation , [email protected]

Disclaimer

This document is prepared by Emirates NBD Bank (P.J.S.C) (“the Bank” or “Emirates NBD”), a public joint stock company incorporated in Dubai, United Arab Emirates (UAE) and licensed to provide various financial services including promotion, financial consultation, securities portfolio management, managing investments of investment funds, etc. Emirates NBD is regulated supervised and controlled by the Central Bank of the UAE (“Central Bank”) and the Securities and Commodities Authority of the UAE (“SCA”), having its head office at Baniyas Road, Deira, PO Box 777, Dubai, United Arab Emirates. This document may be distributed and/or made available by the Bank and its affiliates and subsidiaries, including Emirates NBD Capital KSA CJSC (“ENBD Capital”) (through its website, its branches or through any other modes, whether electronically or otherwise).

Emirates NBD and its affiliates, subsidiaries and group entities, including its shareholders, directors, officers, employees and agents are collectively referred to Emirates NBD Group.

This publication is prepared without regard to the individual financial circumstances and objectives of persons who receive it. Data/information provided in this publication are intended solely for illustrative purposes for the general information or its recipients, irrespective of their customer classification as an Ordinary Investor or Professional Investor under the SCA Regulations.

Any person (hereinafter referred to as “you”, “your”) who has received this document or have access to this document shall acknowledge and agree to the following terms.

Reliance

This publication may include data/information taken from stock exchanges or other third-party sources from around the world, which Emirates NBD reasonably believes to be reliable, fair and not misleading, but which have not been independently verified. The provision of certain data/information in this publication may be subject to the terms and conditions of other agreements to which Emirates NBD is a party. Opinions, estimates and expressions of judgment are those of the writer and are subject to change without notice. Emirates NBD or any member of Emirates NBD Group makes no representation or warranty and accepts no responsibility or liability for the sequence, accuracy, completeness or timeliness of the information or opinions contained in this publication. Nothing contained in this publication shall be construed as an assurance by Emirates NBD that you may rely upon or act on any information or data provided herein, without further independent verification of the same by you.

The contents of this document are prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors, including those relevant to the determination of whether a particular investment activity is advisable. Emirates NBD does not undertake any obligation to issue any further publications or update the contents of this document. Emirates NBD may also, at its sole discretion, update or change the contents herein without notice. Emirates NBD or any member of Emirates NBD Group does not accept any responsibility whatsoever for any loss or damage caused by any act or omission by you as a result of the information contained in this publication (including by negligence).

References to any financial instrument or investment product in this document are not intended to imply that an actual trading market exists for such instrument or product. Certain investment products mentioned in this document may not be eligible for sale in some jurisdictions, and they may not be suitable for all types of investors. The information and opinions contained in this publication is provided for informational purposes only and have not been prepared with any regard to the objectives, financial situation and particular needs of any specific person, wherever situated. If you wish to rely on or use the information contained in this publication, you should carefully consider whether any investment views and investment products mentioned herein are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You should also independently verify and check the accuracy, completeness, reliability and suitability of the information and should obtain independent and specific advice from appropriate professional advisers or experts.

Confidentiality

This publication may be provided to you upon request (and not for distribution to the general public), on a confidential basis for informational purposes only, and is not intended for trading purposes or to be passed on or disclosed to any other person and/or to any jurisdiction that would render the distribution illegal.

Solicitation

None of the content in this publication constitutes a solicitation, offer, recommendation or opinion by Emirates NBD to buy, sell or trade in any security or to avail of any service in any jurisdiction. This document is not intended to serve as authoritative legal, tax, accounting, or investment advice regarding any security or investment, including the profitability or suitability thereof and further does not provide any fiduciary or financial advice. This document should also not be used in substitution for the exercise of the prospective investor’s judgment.

Third Party

This publication is not intended for use by, or distribution to, any person or entity in any jurisdiction or country where such use or distribution would be contrary to law or regulation. It is the responsibility of any person in possession of this publication to investigate and observe all applicable laws and regulations of the relevant jurisdiction. This publication may not be conveyed to or used by a third party without the express consent of Emirates NBD or its affiliates, subsidiaries or group entities distributing this document. You should not use the data in this publication in any way to improve the quality of any data sold or contributed by you to any third party.

Liability

Notwithstanding anything to the contrary set forth herein, Emirates NBD, its suppliers, agents, directors, officers, employees, representatives, successors, assigns, affiliates or subsidiaries shall not, directly or indirectly, be liable, in any way, to you or any other person for any: (a) inaccuracies or errors in or omissions from this publication including, but not limited to, quotes and financial data; or (b) loss or damage arising from the use of this publication, including, but not limited to any investment decision occasioned thereby. Under no circumstances, including but not limited to negligence, shall Emirates NBD, its suppliers, agents, directors, officers, employees, representatives, successors, assigns, affiliates or subsidiaries be liable to you for direct, indirect, incidental, consequential, special, punitive, or exemplary damages even if Emirates NBD has been advised specifically of the possibility of such damages, arising from the use of this publication, including but not limited to, loss of revenue, opportunity, or anticipated profits or lost business.

This publication does not provide individually tailored investment advice and is prepared without regard to the individual financial circumstances and objectives of person who receive it. The appropriateness of an investment activity or strategy will depend on the person’s individual circumstances and objectives and these activities may not be suitable for all persons. In addition, before entering into any transaction, prospective investors should: (i) ensure that they fully understand the potential risks and rewards of that transaction; (ii) determine independently whether that transaction is appropriate given an investor’s investment objectives, experience, financial and operational resources, and other relevant circumstances; (iii) understand that any rates of tax and zakat or any relief in relation thereto, as may be referred to in this publication may be subject to change over time; (iv) consult their advisers on the legal, regulatory, tax, business, investment, financial and accounting implications of the investment; (v) understand the nature of the investment and the related contract (and contractual relationship) including, without limitation, the nature and extent of their exposure to risk; and (vi) understand any regulatory requirements and restrictions applicable to the prospective investor.

Where this publication provides any information about Shariah compliant products, the Bank will not have engaged a Shariah board (or similar body) to determine independently whether or not such products are compliant with Shariah principles. The Bank accepts no liability with respect to the fairness, correctness, accuracy, reasonableness or completeness of any such determination or guidance by any Shariah board that has certified or otherwise approved such products as Shariah compliant. Nothing contained in this publication shall be construed as a recommendation by the Bank to invest in such product. In deciding whether to invest in Shariah compliant products, you should satisfy yourself that investing in such products will not contravene Shariah principles. You should consult your own Shariah advisors as to whether investing in such products is compliant or not with Shariah principles.

Forward Looking

Past performance is not necessarily a guide to future performance and should not be seen as an indication of future performance of any investment activity. The information contained in this publication does not purport to contain all matters relevant to any particular investment or financial instrument and all statements as to future matters are not guaranteed to be accurate. Certain matters in this publication about the future performance of Emirates NBD or members of its group (the Group), including without limitation, future revenues, earnings, strategies, prospects and all other statements that are not purely historical, constitute “forward-looking statements”. Such forward-looking statements are based on current expectations or beliefs, as well as assumptions about future events, made from information currently available. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “seek”, “believe”, “will”, “may”, “should”, “would”, “could” or other words of similar meaning. Reliance should not be placed on any such statements in making an investment decision, as forward-looking statements, by their nature, are subject to known and unknown risks and uncertainties that could cause actual results, as well as the Group’s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Estimates of future performance are based on assumptions that may not be realized.

Risk

Data included in this publication may rely on models that do not reflect or take into account all potentially significant factors such as market risk, liquidity risk, and credit risk. Emirates NBD may use different models, make valuation adjustments, or use different methodologies when determining prices at which Emirates NBD is willing to trade financial instruments and/or when valuing its own inventory positions for its books and records. The use of this publication is at the sole risk of the investor and this publication, and anything contained herein, is provided "as is" and "as available." Emirates NBD makes no warranty of any kind, express or implied, as to this publication, including, but not limited to, merchantability, non-infringement, title, or fitness for a particular purpose or use.

Investment in financial instruments involves risks and returns may vary. The value of investment products mentioned in this document may neither be capital protected nor guaranteed and the value of the investment product and the income derived therefrom can fall as well as rise and an investor may lose the principal amount invested. Investment products are subject to several risks factors, including without limitation, market risk, high volatility, credit and default risk, illiquidity, currency risk and interest rate risk. It should be noted that the value, price or income of securities denominated in a foreign currency may be adversely affected by changes in the currency rates. It may be difficult for the investor to sell or realise the security and to obtain reliable information about its value or the extent of the risks to which it is exposed. Furthermore, the investor will not have the right to cancel a subscription for securities once such subscription has been made. Prospective investors are hereby informed that the applicable regulations in certain jurisdictions may place certain restrictions on secondary market activities with respect to securities.

Before making an investment, investors should consult their advisers on the legal, regulatory, tax, business, investment, financial and accounting implications of the investment. In receiving this publication, the investor acknowledges it is fully aware that there are risks associated with investment activities. Moreover, the responsibility to obtain and carefully read and understand the content of documents relating to any investment activity described in this publication and to seek separate, independent financial advice if required to assess whether a particular investment activity described herein is suitable, lies exclusively with the investor.

Intellectual property

This publication has been developed, compiled, prepared, revised, selected, and arranged by Emirates NBD and others (including certain other information sources) through the application of methods and standards of judgment developed and applied through the expenditure of substantial time, effort, and money and constitutes valuable intellectual property of Emirates NBD and such others. All present and future rights in and to trade secrets, patents, copyrights, trademarks, service marks, know-how, and other proprietary rights of any type under the laws of any governmental authority, domestic or foreign, shall, as between the investor and Emirates NBD, at all times be and remain the sole and exclusive property of Emirates NBD and/or other lawful parties.

Except as specifically permitted in writing, you should not copy or make any use of the content of this publication or any portion thereof or publish, circulate, reproduce, distribute or offer this publication for sale in whole or in part to any other person over any medium including but not limited to over-the-air television or radio broadcast, a computer network or hyperlink framing on the internet or construct a database of any kind. Except as specifically permitted in writing, you shall not use the intellectual property rights connected with this publication, or the names of any individual participant in, or contributor to, the content of this publication, or any variations or derivatives thereof, for any purpose. This publication is intended solely for non-commercial use and benefit, and not for resale or other transfer or disposition to, or use by or for the benefit of, any other person or entity. By accepting this publication, you agree not to use, transfer, distribute, copy, reproduce, publish, display, modify, create, or dispose of any information contained in this publication in any manner that could compete with the business interests of Emirates NBD. Furthermore, you should not use any of the trademarks, trade names, service marks, copyrights, or logos of Emirates NBD or its subsidiaries in any manner which creates the impression that such items belong to or are associated with you, except as otherwise provided with Emirates NBD’s prior written consent. You shall have no ownership rights in and to any of such items.

IMPORTANT INFORMATION ABOUT UNITED KINGDOM

This publication was prepared by Emirates NBD Bank (P.J.S.C) in the United Arab Emirates. It has been issued and approved for distribution to clients by the London branch of Emirates NBD Bank (P.J.S.C) which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority in the UK. Some investments and services are not available to clients of the London Branch. Any services provided by Emirates NBD Bank (P.J.S.C) outside the UK will not be regulated by the FCA and you will not receive all the protections afforded to retail customers under the FCA regime, such as the Financial Ombudsman Service and the Financial Services Compensation Scheme. Changes in foreign exchange rates may affect any of the returns or income set out within this publication.

IMPORTANT INFORMATION ABOUT SINGAPORE

This publication was prepared by Emirates NBD Bank (P.J.S.C) in the United Arab Emirates. It has been issued and approved for distribution to clients by the Singapore branch of Emirates NBD Bank (P.J.S.C) which is licensed by the Monetary Authority of Singapore (MAS) and subject to applicable laws (including the Financial Advisers Act (FAA) and the Securities and Futures Act (SFA). Any services provided by Emirates NBD Bank (P.J.S.C) outside Singapore will not be regulated by the MAS or subject to the provisions of the FAA and/or SFA, and you will not receive all the protections afforded to retail customers under the FAA and/or SFA. Changes in foreign exchange rates may affect any of the returns or income set out within this publication. Please contact your Relationship Manager for further details or for clarification of the contents, where appropriate. For contact information, please visit www.emiratesnbd.com.

IMPORTANT INFORMATION ABOUT EMIRATES NBD CAPITAL KSA CJSC

Emirates NBD Capital KSA CJSC (“ENBD Capital”), whose registered office is at P.O. Box 341777, Riyadh 11333, Kingdom of Saudi Arabia, is a Saudi closed joint stock company licensed by the Saudi Arabian Capital Market Authority (“CMA”) under License number 37-07086 dated 29/08/2007G (corresponding to 16/08/1428H) to deliver a full range of quality investment products and related support services to individuals and institutions in the Kingdom of Saudi Arabia. ENBD Capital is subject to Capital Market Law, and Implementing Regulations in the Kingdom of Saudi Arabia

ENBD Capital’s contact details are T +966 (11) 299 3900 and F +966 (11) 299 3955.

This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Investment Funds Regulations issued by the Capital Market Authority.

The Capital Market Authority does not make any representation as to the accuracy or completeness of this document, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective subscribers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities offered. If you do not understand the contents of this document, you should consult an authorised financial adviser.