The investment letter- February 2026

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Equity market:

European indices continued to rise in February, reaching new all-time highs (MSCI Europe NR +4.1%). While the directional trend of the indices remained unchanged, the same cannot be said for the relative performance of the various style and sector segments that make up the European market. Value stocks continue to stand out, but this hides a rotation that has been gradually taking place over the past six months. Cyclical value stocks (basic resources and energy) and domestic value stocks (telecoms and utilities) are now outperforming financial value stocks (banks and insurance companies), whose momentum is slowing. Furthermore, thanks to the strong performance in February of the food & beverage, chemicals, and real estate sectors, helped by the easing of long-term interest rates, the defensive “visibility” style—which includes defensive stocks with regular and predictable cash flows, sometimes described as “proxy bonds”—outperformed in February. This is a rare occurrence that only happened once in 2025, in April.

The situation is different in the United States, where the MSCI USA NR index fell over the month (-0.9%), while the MSCI USA NR Small index climbed (+2.7%). This is part of a healthy process of fundamental normalization. Stocks linked to AI, which are heavily weighted in the indices, are derating, while the rest of the market is tending to re-rate. After a long period of favouring AI producers, the market is now logically turning its attention to AI users.

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Fixed Income market: 

On the fixed income side, global investment grade bonds returned 0.49%, while high yield posted a more modest gain of 0.26%. Volatility in rates markets persisted as investors reassessed the path of monetary policy and fiscal dynamics. A strong US employment report in mid-February caught investors in the $30 trillion Treasury bond market off guard, sending yields surging as the market adjusted expectations for Federal Reserve interest-rate cuts in 2026 Yields on two-year notes jumped as much as 9.5 basis points to 3.55%. The benchmark two-year yield and ten-year yield finished the month at 3.38% and 3.95%, respectively.

Global convertible bonds continued to deliver strong performance in February. Regionally, Japan led performance, followed by Europe and the US, with Asia ex-Japan lagging. Year to date, the asset class shows strong performance, well ahead of global equities, investment grade, high yield, and government bonds. That said, at the single-name level, performance was concentrated among a small number of names, highlighting the narrowness of the rally.

On the primary market, February was exceptionally active with $22.7 billion in new global supply, nearly three times the historical average for the month, bringing year-to-date global volumes to $36.2 billion, a record-setting pace. The standout deal was Oracle’s $5.0 billion mandatory convertible preferred, one of the largest single-tranche convertible offerings on record, issued as part of its broader $50 billion AI capital expenditure financing package. Nippon Steel raised ¥600 billion ($3.8 billion) across two tranches, marking the largest convertible bond ever from a Japanese issuer.

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