Markets faced another turbulent month in February as investors navigated a series of major developments, including a landmark Supreme Court ruling on tariffs and escalating military tensions in the Middle East.
The S&P 500 declined 0.9% for the month while the Bloomberg US Aggregate Bond index gained 1.6%, according to First Western Trust's latest market commentary. Fourth-quarter GDP growth also slowed to 1.4%, adding to economic concerns.
The Supreme Court delivered what many consider the month's most consequential decision, ruling 6-3 that President Trump's tariffs implemented under the International Emergency Economic Powers Act (IEEPA) are illegal. The decision affects what the bank describes as "reciprocal" tariffs levied on other countries.
However, the court left unresolved questions about approximately $160 billion collected under the IEEPA since last April. Those decisions will fall to lower courts, which are expected to face numerous lawsuits from businesses seeking reimbursement.
President Trump responded immediately by implementing new tariffs under Section 122 of the 1974 Trade Act, establishing a 10-15% baseline tariff on all goods entering the country. These Section 122 tariffs are limited to 150 days and can only be extended by Congressional approval.
The administration indicated it will use the 150-day window to conduct investigations into various trading partners to justify implementing tariffs under different legal authorities.
Military tensions escalated significantly when the US and Israel launched large-scale military operations against Iran, adding geopolitical risk to market concerns.
Investors also continued grappling with artificial intelligence-related concerns across various industries. These AI worries have persistently weighed on market sentiment as companies and investors assess the technology's disruptive potential.
Additionally, tremors in the private credit market captured investor attention, suggesting potential stress in this increasingly important segment of financial markets.
The combination of legal uncertainty around trade policy, military action in the Middle East, and technological disruption created a challenging environment for investors in February.
Looking ahead, markets will likely focus on how quickly lower courts resolve the tariff reimbursement questions and whether Congress will extend the new baseline tariffs beyond their 150-day limit. The ongoing military situation with Iran and continued AI adoption across industries will also remain key factors influencing market direction.