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Market Rebounds Amid Tariff Shock and Tech Rotation 🔄
Navigating Volatility in a "Choppy but Positive" Market ✅
Why Long Term Holding Trumps Market Timing ⌛
“You can lose money very fast, in two months, but you very rarely make money very fast in the stock market. When I look back, my great stocks took a long time to work out.”
Market Rebounds Amid Tariff Shock and Tech Rotation
The stock market is riding a wave of recent gains, with the S&P 500 closing Friday up 0.74% YTD , Dow Jones up 2.57% YTD, however the NASDAQ continues to struggle, down 1.50% YTD.
Investors are shifting from overvalued tech into value sectors such as energy and industrials, amplified by the Supreme Court's rejection of President Trump's sweeping tariffs, which has boosted yields and eased volatility with the VIX dropping to 19.09.
Optimism still persists with anticipated Fed rate cuts and Nvidia's earnings on February 25.
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Navigating Volatility in a "Choppy but Positive" Market
Welcome to the newest edition of our newsletter, where we're diving into the choppy waters of today's market.
In the past, the month of February has a notorious reputation for mediocrity and volatility.
S&P 500 Performance: Some studies note that the S&P 500 averages just a 0.1% gain while others note a 0.01% loss in the month of February, making it one of the worst-performing months of the year.
VIX Behavior ("Fear Gauge"): The VIX index has historically shown a tendency to increase in February. Data shows the VIX has risen by an average of 5.5% since 1990, confirming it is a period of higher-than-average volatility.
Fast forward to February 2026 and this appears to be exactly what we’re seeing: quick dips followed by rebounds amid key economic data releases like CPI and GDP reports.
But here’s the good news, the overall tone of the market remains positive, with indices near highs and market opportunities for those who remain disciplined.
Lets break it down.
So far in February, markets have been a rollercoaster, but they’ve continued to show some resilience despite the turbulence.
Take early February for example.
After a week where AI disruption fears crushed tech stocks, triggering a sharp sell-off, the S&P 500 and Nasdaq experienced a rebound on February 6th. The S&P rose ~2%, marking its best daily session since May 2025, and the Nasdaq climbed ~2.1%.
The Dow Jones even topped 50,000 for the first time ever on that day.
Individual stocks tell the story too.
Nvidia $NVDA ( ▼ 4.57% ) got caught in the slump early February as well, but rebounded ~8% on February 6th as investors reassessed Big Tech spending and rotated back into chipmakers.
Broadcom $AVGO ( ▼ 5.28% ) also followed suit on that day with a ~7% gain.
This choppiness in the market intensified around key data drops.
The January CPI report, released on February 13, showed inflation cooling to 2.4% year over year, down from 2.7% in December and the lowest since May 2025.
This beat expectations slightly, easing fears of sticky prices and sparked quick buying.
How did the markets react?
They dipped briefly prior to the release just based on uncertainty, but rebounded as the numbers reinforced the Feds easing.
The Q4 2025 GDP estimate dropped on February 20th coming in at +1.4%, below the +2.5% anticipated and 300 basis points lower than the final read of Q3, but still higher than the -0.6% reported for Q1.
What drives these short-term swings?
At their core, they’re fuelled by a mix of economic data, corporate earnings, geopolitical headlines and investor sentiment.
CPI and GDP releases can be catalysts for the market, as strong numbers can promote optimism, while misses spark fear.
Plus if you add in AI headlines and Fed policy shifts, the swings in the market are even more amplified. Finally, geopolitics such as the Japanese bond yield spike in January that briefly caused global stocks to fall by 2% give us a friendly reminder of just how interconnected everything actually is.
But as always, if you zoom out far enough, events like these are just noise in the grand scheme of things.
Remember: Markets often price in the worst-case scenarios before correcting themselves.
Key Takeaway: Why Long Term Holding Trumps Market Timing
Trying to dodge volatility often backfires.
Studies show that missing the S&P 500’s 10 best days can crush your returns.
In fact, missing the 10 best days cuts your annualized return from 7.92% to just 3.79% (over a 20 year period ending April 4, 2025).
Taking it a step further, if you missed the 20 best days, your annualized return falls to just 1.18% and if you missed the 25 best days, that becomes only 0.09%.
Yikes….
In February 2026's environment, with the S&P not far from record highs, patience pays.
Contrast that with trying to time the market and many retail investors end up selling at lows and buying at highs, eating into their long term gains.
Emotions amplify the damage.
FOMO (fear of missing out) drives investors to chase highs, like piling money into Nvidia at peaks only to see it fall on nothing more than AI doubts.
On the flip side, fear can trigger panic-selling during dips, locking in those once “unrealized losses”.
The solution: Stick to the fundamentals and ignore the noise.
Some tools to help navigate this
Dollar-cost averaging (DCA) is a powerhouse tool. Invest fixed amounts of money regularly, buying more shares when prices fall. In the choppy month of February 2026, DCA’ing smooths out volatility without the need to guess bottoms.
Building a watchlist is another great tool that allows you to focus on quality companies with strong earnings and track them as they move in or out of fair value territory. Just because a stock is on your watchlist doesn’t mean you have to buy it, but its good practice to keep a watchlist in case anything drastic happens in the market.
I would avoid stop-loss orders in a market like this, as they can trigger unnescessary sells on temporary swings because of the reasons above, causing you to miss out on rebounds. Use them sparingly, if at all.
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Volatility creates opportunities for long-term investors.
Stay invested, stay informed, and stay dominant.
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The Profit Zone
