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Economy & Markets 

  • Even with the Northeast covered in snow and Punxsutawney Phil forecasting six more weeks of winter there are signs of “green shoots” appearing in the economy. While consumer spending and confidence still show a lack of ebullience, we are starting to see emergent strength in the economy that may foretell good news for the year ahead.
  • The Institute for Supply Management (ISM) Manufacturing index jumped to its highest level since August 2022 and is in expansion territory for the first time in a year. The new order and production components of the index surged which can indicate strong growth in the future. Export orders also rose which eases concerns over tariff related challenges to trade.

 Equities

  • The S&P 500 continued its upward ascent in January, advancing 1.44% despite underlying stock volatility. Value leaning sectors performed best led by Energy, Materials, and Consumer Staples. Growth stocks underperformed their value-oriented peers, helping to broaden overall market participation.
  • S&P 500 sales and earnings have surprised to the upside thus far in Q4 earnings reports with management teams providing constructive 2025 outlooks. At 21.8x expected forward earnings, equity valuations remain expensive versus history as expectations for corporate earnings call for growth in FY’26 and FY’27 of +14.0% and +15.5%, respectively.

Fixed Income 

  • The yield curve bear flattened this month with 2-year U.S. Treasury yields 7 basis points higher while the 10-year U.S. Treasury yields rose 5 basis points.
  • Investment grade credit spreads tightened to 71 basis points, the lowest level since 1998. Although credit spreads remain historically tight, all-in yields are still attractive.

Employment

  • January unemployment declined to 4.3% from 4.4% in December. The economy added 130,000 jobs for the month which was a positive surprise and the strongest job growth in over a year. Healthcare and Social Assistance (HSA) jobs accounted for most of the job growth seen in 2025.
  • Revisions to job growth estimates in 2025 cut growth to 181,000 from an earlier estimate of 584,000. By comparison, in 2024, the economy added 1,500,000 jobs. The rise in January hiring was welcome news for the market.

Federal Reserve 

  • The choice of Kevin Warsh for Fed Chairman was greeted positively by investors. Expectations for interest rate cuts in 2026 have come down as economic growth has picked up and recession fears have abated.
  • The Consumer Price Index (CPI) rose 2.4% in January from a year earlier, down from the 2.7% rate in December.

Issues to Watch

  • Investors will be monitoring consumer spending closely in 2026. Consumers have been a bright spot in the U.S. economy for several years. Any slowdown within consumer spending will likely cause a slowdown in economic growth.
  • Global tensions over tariffs, Ukraine, Venezuela, the Middle East, and Taiwan have not stopped investors from lifting the Dow to an all time high of 50,000. This sanguine environment will certainly be tested as the year unfolds.
Chart of Economic Metrics February 2026

1 Data provided by Bloomberg. Metrics are as of month-end or most recent publication
2 Provided by U.S. Real GDP Economic Forecast Survey Median
3 Provided by World Real GDP Economic Forecast Survey Median
4 Provided by Bloomberg Intelligence Forecast
5 Provided by World Probability Forecast
6 Arrows represent a month-over-month change

Chart of Index Returns February 2026

Asset Allocation / Tactical Positioning 

Chart of Asset Class February 2026

7 Equity tactical weights are relative to the Cambridge Trust Wealth Management Core Equity allocation and is comprised of 80% S&P 500 and 20% MSCI AC World ex-U.S. Index.
8 Fixed Income tactical weights are relative to the Cambridge Trust Wealth Management Core Taxable allocation and is comprised of 100% Barclays Intermediate Gov/Credit Index.
9 Below investment grade holdings include high yield and emerging market debt mutual funds. Represents an out-of-benchmark allocation that will be reflected as an overweight position relative to the Barclays Intermediate Gov/Credit Index if any allocation is held.
10 Alternative tactical weights represent an out-of-benchmark allocation that will be reflected as an overweight position when utilized and neutral position when not.
11 Direction arrow highlights any recent changes of the overall allocation after a recent tactical asset allocation or strategy change. Last changes were made at January 2026 Asset Allocation Committee meeting.

Views are as of February 2026 and are subject to change based on market conditions and other factors. The opinions expressed herein are those of the author(s), and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice based on market conditions and other factors. These views and opinions should not be construed as a recommendation for any specific security or sector. This material is for your private information, and we are not soliciting any action based on it. The information in this report has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information. Past performance does not guarantee future performance.