Economic Pulse: February 2026
Executive Summary
There I was thinking last month as unprecedented (in this project's history) regarding geopolitical news and events. So I'll be careful picking extremes going forward. February 2026 will definitely be remembered as a point of changing global dynamics. On Feb. 28th, the US and Israel launched joint strikes on Iran, killing Supreme Leader Khamenei over night and triggering seemingly uncontrolled retaliations across the whole Gulf region, as well as a closure of the Strait of Hormuz, sending oil from $72 to >$100 within days.
With this next military intervention, the US has changed the world in many ways. While I will not comment on the political evaluations here, it has definitely pushed all other news aside, even if they were economically relevant: The Supreme Court struck down IEEPA tariffs and the labor market posted its worst reading since the pandemic. (!)
The AI investment cycle hit new highs even as the Nasdaq posted its worst month since early 2025. This is clearly uncharted territory for me, making it even more important to base my investment decisions on clearly defined rules in the Shuhari.Capital application instead of trying to process all this information manually.
Big Picture: Jobs Data, Courts against Tariffs, GDP
The labor market has visibly broken. February non-farm payrolls came in at negative 92,000, dramatically missing the +55,000 consensus. This has been the third job loss in five months and unemployment rose to 4.4%. (December was revised to −17,000 from +48,000!). Federal employment has fallen 330,000 (11%) since peak. Powell acknowledged that "job creation in the US has slowed to essentially zero." There is a lot of noise on the political stage, but this is VERY negative news.
In a positive move (interpreted living in a trade counterpart of the US), the Supreme Court has ruled the tariff regime unlawful. In a 6–3 ruling it was stated that IEEPA cannot be used to impose tariffs, removing the legal basis for the roughly $166B in duties collected from over 300,000 businesses since inception. President Trump responded by imposing an indifferent 10% global tariff under Section 122 of the Trade Act for the next 150 days. Again, profiting from the global military noise, the fact that this whole policy setup is without legal basis seems unsettling but swept under the rug.
Inflation held at 2.4% YoY, now proving to be stale. Hard to interpret any of this in the tumult, but with oil above $90, I expect March and April CPI to reverse any progress and more.
US GDP grew by just a small 0.7% in Q4 2025, down from Q3's 4.4% and far below the 2.8% consensus. Interestingly (given the 2025 "chainsaw" project...) government spending subtracted nearly a full percentage point (!!). Full-year 2025 GDP: ~2.1%, down from 2.8%.
What does it mean?
This is the most challenging environment since I launched the Shuhari.Capital Engine project.
The Sector Navigator is showing violent rotations with energy and materials surging, tech and software going into retreat. (The iShares Tech-Software ETF fell ~10% in February alone!!)
The Momentum Chaser faces the same constant regime change: AI-led momentum trades are being disrupted by energy-driven inflation, geopolitical/military risk, and a labor market that neither the software nor I can make any sense of.
The Alpha Overlay's job is to capture the strongest winners in these rotations, but the speed of the shift might be too fast for our monthly rebalancing cadence.
IMPORTANT: As a result, I actually went flat at the end of February while revisiting engine parameters and trying to stress test with a new backtesting engine.
This is me deviating from the idea to always follow the engine instructions. But I'd rather have these unprecedented shifts go through testing first before the live model gives any advice.
Data Sources:
BLS. Consumer Price Index (February 2026, released March 2026)
BLS. Employment Situation (February 2026, released March 2026)
BEA. GDP Q4 2025 Advance Estimate (February 20, 2026)
ISM. Manufacturing & Services PMI (February 2026)
Supreme Court. Learning Resources, Inc. v. Trump (February 20, 2026)
Wikipedia / Britannica. 2026 Iran War, Strait of Hormuz Crisis
IEA. Oil Market Report (February 2026)
Dallas Fed. Strait of Hormuz Economic Analysis (March 2026)