Economy & Markets
- The attack on Iran by the United States and Israel has created widespread uncertainty in the Middle East. Iran has responded with retaliatory strikes on several countries creating turmoil in global financial markets. Investors are confronted with rising energy prices potentially putting upward pressure on near-term inflation and may impact economic growth forecasts.
- The duration of military hostilities and the length of time shipping is impaired through the Strait of Hormuz will ultimately determine the economic impact on the U.S. and global economies. Economists estimate that an oil price above $100 per barrel, for a sustained period, could lower GDP growth by 0.2% – 0.4% and raise the inflation rate.
Equities
- The S&P 500 posted a modest -0.76% decline in February as volatility increased and investors reduced positions in concentrated large-cap growth stocks. Performance in the month was led by the Utilities, Energy, Materials, and Consumer Staples sectors. Growth stocks continued to underperform value-oriented peers and international equities outpaced domestic shares.
- February represented the conclusion of Q4 earnings reporting for the S&P 500; results were favorable and outlook for 2026 remains constructive with expectations for revenue and earnings growth at +7.5% and +13.9%, respectively.
Fixed Income
- The yield curve bull flattened this month with 2-year U.S. Treasury yields 14 basis points lower while the 10-year U.S. Treasury yields declined by 29 basis points.
- Investment grade credit spreads widened by 11 basis points to 84 basis points on heavy supply and AI cap-ex concerns.
Employment
- The February unemployment rate rose to 4.4% from 4.3% in January. The economy lost 92,000 jobs for the month and the prior two months were revised down by 69,000. Uncertainty around tariffs and the impact of AI is cited by many economists as sources of the current “low hire, low fire” labor market.
- The weakness in the job market is broad based with declines seen in Leisure and Hospitality, Manufacturing, and Construction. The Healthcare and Social Assistance sector was impacted by a strike in California by 31,000 workers.
Federal Reserve
- The Fed has a very difficult job ahead as they deal with upward pressure on inflation due to rising energy prices coupled with a weakening job market.
- The Fed’s preferred gauge of inflation, the Personal Consumption Expenditures (PCE) index, is released on March 13th for the month of January. Expectations are for a reading of 2.9%, the same as in December. This will be the last important data point before the Fed’s next meeting.
Issues to Watch
- Elevated energy prices due to the conflict in the Middle East will have a negative impact on the U.S consumer. Investors will be watching this conflict closely to gauge the expected extent of this impact.
- The unknown outcome of the Iran attack will cast a pall over forecasts for economic growth, especially if hostilities last longer than anticipated.
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
Asset Allocation / Tactical Positioning
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 March 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.