DFO Monthly Review – February 2026

February 2026: A Strong Month Across Asset Classes

Like January, global financial markets experienced a very good February. Good money was made across all asset classes, from our money market components to bonds with normal duration and long-term bonds, which recorded capital gains for the first time in many months. The same applies to emerging market, high-yield and subordinated debt.

Global Equity Markets: Diversification Away from America

With regard to global equity markets, many trends remained intact, primarily involving diversification away from America and towards Europe, Asia and Latin America. In Asia, this was reflected in strong enthusiasm for semiconductor stocks, which were identified as the winners of artificial intelligence, leading to price explosions at Samsung Electronics, SK Hynix and Taiwan Semiconductor.

This was accompanied by continued enthusiasm for gold and copper mining stocks, some of whose price movements are making our heads spin. On the one hand, this is encouraging, but on the other hand, investors who are not already invested should hold back when prices are skyrocketing and only buy once such stocks have calmed down again.

Small Caps, REITs and the Exceptions to the Positive Trend

The positive trend in small and mid-cap stocks continued in February, which we are very pleased about, as we have been promoting them for a long time. The same applies to REITs, which have risen sharply since the beginning of the year and have clearly bottomed out.

The only exceptions to the positive performance in February were the shares of large American technology companies, which are included in the Nasdaq 100 and the S&P 500 indices, as well as funds managed by growth managers who focus heavily on technology companies with high growth and low profitability (Baillie Gifford Long Term Global Growth as well as Morgan Stanley Asian and Global Opportunities). These were joined by the shares of private equity managers, all of which are suffering from the negative news regarding private credit portfolios.

Private Credit Under Pressure

It remains to be seen how private credit will fare in the current crisis, which is the first of its kind, as the asset class was essentially born out of post-GFC regulation. We have always been very sceptical regarding the claims of private credit managers and their salespeople that we could expect equity-like returns without volatility and corresponding risks. As a result, we did not include any private credit components in our advisory universe, even though some of our community members were enquiring about it.

The Attack on Iran Reshuffles the Cards

Since the attack on Iran by American and Israeli forces over the weekend, the cards are being reshuffled. Many stock indices have abruptly interrupted their upward trends and shifted into reverse gear. Leading the way, the Korean Kospi index, which had fallen into a kind of semiconductor euphoria, experienced a crash but remains clearly in positive territory for the year. We like Korean equities and have been buying them for client portfolios for more than a year, but we would be a little more cautious with fresh money and would only buy in the event of significant setbacks, such as yesterday.

In contrast to the high-flyers in Korea, indices such as the German DAX 40 and the Hang Seng Index in Hong Kong have already lost all gains since the beginning of the year.

Keep a Cool Head: Focus on Valuations, Not Emotions

It is important to keep a cool head and not let fear and emotions lead to wrong decisions. Investment decisions should always be made based on your personal financial situation and not on emotions.

As is so often the case, the skyscraper charts on pages 7 to 10 can help us here, as they clearly show that most relevant asset classes are valued cheaply or within normal valuation ranges. This should not change fundamentally even if the armed conflicts lead to a temporary rise in oil and gas prices.

That said, rising inflation rates are not good for global financial markets, which is why they will probably remain volatile until there are signs of an end to the war or at least clarity about the direction in which energy prices are heading.

Outlook – It’s Still Worth Taking a Look at Valuations

The Impact of War on Portfolios and Inflation

The war in Iran has clearly interrupted the positive market performance since the beginning of the year and is forcing us to review our portfolios, particularly with regard to a possible resurgence of inflation. This is because inflation determines the behaviour of global central banks. Most major central banks found themselves in an environment of stable to slightly falling interest rates. However, if the current rise in oil and gas prices leads to a renewed increase in inflation rates, central banks may either refrain from further lowering their key interest rates or even raise them slightly. Such a scenario is probably not yet reflected in current prices and could lead to further price adjustments and elevated volatility.

However, if we look at the current valuations of high-return and safety components in our Skyscraper Charts (pages 7–10), we are pleased to note that current yields on safety (fixed income) components are all above the expected medium-term inflation rate of around 2% p.a., regardless of the investment horizon (FairHorizons purple to green). Even money market investments are close to current inflation rates and therefore offer purchasing power preservation, even if we see a certain increase in oil and gas prices.

High-Return Components: Target Returns and Risk Premiums

With regard to the high-return components that we select for longer-term investment horizons (FairHorizons yellow to red), we always communicate a minimum expected return of 6% p.a., or a projected long-term return of between 6% and 8% p.a.

Due to the good performance in 2025 and since the beginning of the year, the current target returns (or risk premiums) of many return components are now below the 6% mark, which is why we would not be particularly enthusiastic about buying them at present. This applies to the Nasdaq 100 Index and, to a lesser extent, to the S&P 500 and the MSCI World Index.

The MSCI AC World IMI Index, which also includes small companies and developing countries, is back at a risk premium of just under 6% and can therefore be considered for new investments. Indices such as the MSCI World Value, High Dividend and Multi Factor are still offering risk premia above 6% p.a., which makes them appear equally attractive for fresh money.

Europe, Asia and Emerging Markets Remain Attractive

Equities in Europe, Asia and emerging markets offer risk premiums (i.e. target returns) of between 7% and 8% p.a., which is why we are comfortable on the buy side here, even if valuations are no longer as favourable as they were at the beginning of 2025. The recent correction at Taiwan Semiconductor and Samsung Electronics is very welcome, as both stocks are heavily represented in both Asian and emerging market portfolios.

Opportunities in REITs, Quality, Healthcare and Private Equity

The valuation of the building blocks of our losers for 2025, i.e. real estate stocks (REITs), quality factor index ETFs and quality managers, the healthcare sector and listed private equity companies, remains attractive to very attractive. It therefore invites investors to take a closer look at such investments, which offer promising long-term prospects but have been disappointing in the short term.

Regarding shares in private equity companies, we are monitoring the situation very closely, especially considering another wave of write-offs and redemption requests for private credit portfolios. Whilst we bought some private equity manager index ETFs in January based on their attractive valuations, we are now holding back on further purchases until we have more clarity on where private credit portfolios and redemption requests are heading.

Currency Outlook: Dollar Stabilisation and Diversification

On the currency side, we can see that the US dollar appears to be stabilising sustainably. It is currently even benefiting from the armed conflict in Iran. Nevertheless, it should not be forgotten that the American government tends to prefer a weaker dollar and that the currency appears expensive given America’s high level of debt. A certain degree of diversification into more solid currencies such as CHF, SGD, AUD and NOK may be advisable. If community members are interested in foreign currency financing, we currently prefer CHF, SGD and HKD over the Japanese yen.

Three Proven Investment Strategies for the Long Term

We generally promote three investment strategies or investment philosophies, which we can confidently assume will most likely be successful in the long term. They are well-proven and have delivered good results for investors who have consistently followed them. They all delivered good results in 2025 and the early months of 2026, even if there are material differences in short-term returns:

1) Traditional Index Investing / Indexing

Equity markets continued to show a clear regional divergence that had already begun last year. Indices and market segments with lower exposure to U.S. equities have performed significantly better so far this year. Markets in Europe, Asia and emerging economies have generally outperformed many traditional global indices that are heavily dominated by American technology companies. This development reflects the ongoing diversification away from the United States that we have been observing for several months.

In the case of bond indices, traditional indices are inevitably more heavily invested in bonds from more indebted issuers. For this reason, investors who are enthusiastic about ETFs should take the trouble to compare bond indices with systematically calculated indices (e.g. Dimensional) or well-managed bond portfolios at institutional pricing. They often do better and should not be ignored by cost-conscious investors.

Avoid the Magnificent 7 Until Valuations Correct

The exception to this assessment is the majority of the “Magnificent 7”, which dominate the Nasdaq 100, the S&P 500 and the MSCI World Index. Regardless of further developments in the Middle East, they should be avoided as long as the currently expensive valuations have not been significantly corrected.

Since, apart from Apple, the Magnificent 7 are now generating much less free cash flow than we have been accustomed to for years, I am prepared to say that they will remain underperformers for quite some time. Community members who are heavily invested in these names should consider reducing any overweight positions they may have.

Commodities: A Growing Allocation

As in January, commodity markets had a strong February, which clearly shows that more investors are turning to these markets, although they traditionally tend to feel more comfortable with bonds and stocks.

We can also see this in our ARERO portfolio component, which is systematically managed and has always had a 15% allocation to commodities since its launch in 2008. Until 2020, it was unable to outperform traditional portfolios consisting of 60% equities and 40% bonds. Since then, however, it has gained ground and is proving to be a good idea for the current global situation and an investment horizon of 7 to 10 years.

At the end of February, we deliberately organised a webinar on commodities and precious metals to give our community members the opportunity to position themselves accordingly.

Slides from the webinar

Recording of the webinar

Bitcoin and Crypto: Remain Cautious

Bitcoin recently fell to just under USD 60,000 but is currently holding steady above USD 70,000 again. Nevertheless, we would remain cautious on crypto and prefer an allocation to commodity indices or gold and copper mining stocks to balance equity and fixed income exposure.

2) Factor-Based or Scientific Investing

Factor performance remained one of the most notable developments in equity markets during the first months of the year. As in January, the value factor delivered strong excess returns in February. Shares of smaller companies also performed well. They recorded a strong start to the year both inside and outside the US. After a weak performance in 2025 and a stronger January, the quality factor continued to recover in February. This is encouraging given that many actively managed portfolios rely heavily on high-quality companies.

In fixed income markets, systematically constructed bond portfolios once again showed slightly better results than many traditional bond indices during February, continuing a trend that has been visible for some time.

3) Focused Investing in a Small Number of Securities

Actively managed strategies also delivered encouraging results in February. Our preferred actively managed bond portfolios once again clearly outperformed their benchmark indices. The same applies to many active equity managers who, with only a few exceptions, produced strong results during the month.

One particularly notable example is Paul Wick from Threadneedle. His technology fund is up around 12% since the beginning of the year, whereas the Nasdaq 100 has declined by more than 2% over the same period. This divergence highlights the ongoing rotation within the technology sector itself. Capital appears to be moving away from the largest technology companies in the Nasdaq 100 and the Magnificent 7 towards other segments of the technology market that offer more attractive valuations and broader growth opportunities.

Wick’s strategy therefore offers one way for investors to remain invested in the technology sector while still participating in this broader rotation away from the largest and most expensive technology companies.

Precious Metals, Mining Stocks and Commodity Allocation

As far as the current enthusiasm for precious metals and copper is concerned, we decided to include ETFs that invest in the relevant mining companies in our programme. We are not really fans of “emotional investments” such as gold and Bitcoin, but we cannot deny that there has been a change in the global situation, particularly regarding gold since the Russian invasion of Ukraine in 2022.

Whilst we do not know what will happen to the price of gold, silver and copper in 2026, we do know that mining companies are currently generating a great deal of liquidity that can be used for dividends and share buybacks. We are therefore very comfortable investing in them via ETFs and certain active managers. In addition, the risk premiums here are between 7% and 8% p.a., which appears attractive. We would therefore prefer an investment in mining companies to a direct investment in gold, silver or copper.

In general, we consider the addition of commodities via broadly diversified indices or funds to be sensible but would not want to exceed a portfolio allocation of 10–15%. In the long term, investments in metals and precious metals have outperformed commodities that have to be purchased via futures, which involve considerable “roll costs” and reduce returns. These include, above all, energy and agricultural commodities, which are weighted at around 60–70% in commodity indices, explaining our preference for metals and precious metals, or shares in metal and precious metal producers.

Technology Sector: Look Beyond the Magnificent 7

Anyone interested in the technology sector despite all the valuation issues should look at Paul Wick, the manager of the CT Global Technology Fund. He has proven that he is capable of successfully investing in technology stocks outside the Magnificent 7.

Stick to Your Chosen Investment Style

As far as our three preferred investment styles are concerned, we can only emphasise that all three strategies work in the long term, even if they may disappoint in the short term. Investors should therefore stick to their chosen investment styles and not change them out of disappointment. For example, anyone who switched from the Dimensional World Equity Portfolio to the MSCI World in 2025 would now be missing out on a significant outperformance.

In this context, I am also thinking of the poor performance of the quality factor in 2025, which seems to be reversing in 2026 because risk premiums have now risen above 5% p.a. again and the dollar weakness of the previous year should no longer have such a strong impact. This is good news for quality factor indices and several of our active managers.

Those who simply want to mirror current trends should consider value strategies. Here, the positive development of recent years seems to be continuing and valuations remain favourable.

Our Recommendations for Fresh Money

We generally recommend indexing for money market investments, active management for most bond strategies and a mixture of indexing and stock picking for equity investments. We do this for our own portfolios and are pleased with the results.

For “fresh money”, we recommend our proven concept of FairHorizons, which we have developed based on established asset allocation principles. It offers a simple way of creating portfolios that can beat inflation and earn attractive risk premiums.

FairHorizons Investment Guide

Please also take a look at our standard investment portfolio ideas on pages 33 to 35, which follow the principles of investment legends such as Jack Bogle, Eugene Fama/Kenneth French and Warren Buffett/Charlie Munger. While all of them represent different investment philosophies, they have all proven to be very effective and successful in the long term.

If you are concerned about whether your portfolio is well equipped for the significant changes in today’s world, please feel free to get in touch with us. We would be more than happy to provide you with a complimentary review.

Otherwise, I would be delighted if you could tell your friends and family about Das Family Office so that they can also become part of our community.

With best wishes for a wonderful spring and a swift resolution to the war in Iran!

Yours,
Mario Becker