US Trade Policy: The Supreme Court Earthquake
February also delivered a large development on the trade policy front. On 20 February, the US Supreme Court ruled 6-3 that the International Emergency Economic Powers Act does not authorise the President to impose tariffs, striking down the broad set of tariffs that had been imposed on trading partners including China, Canada, Mexico, and the EU.
President Trump responded swiftly, announcing a new 10% global tariff under Section 122 of the Trade Act of 1974, effective from 24th February. For UK and European businesses, the Supreme Court’s ruling and subsequent Section 122 tariff represent a partial easing of trade tensions compared to the peak tariff regime, though uncertainty remains elevated. The situation continues to evolve rapidly, and any further escalation tied to the Iran conflict could prompt further policy responses from both the US and its trading partners.
UK Inflation and Interest Rate Outlook
The Bank of England (BoE) held interest rates at 3.75% at its 5 February meeting, in a notably close 5–4 vote. Four members favoured an immediate 25 basis point cut, a more dovish outcome than the 7-2 split most economists had forecast. The Bank signalled that further cuts are likely later in 2026, with markets now pointing to the April meeting as the most probable date for the next reduction.
UK inflation has begun to ease more meaningfully. The consumer price index (CPI) reading for January 2026 came in at 3.0%, down from 3.4% in December 2025, a move in the right direction. The Bank now projects inflation returning to its 2% target by June 2026 a significantly earlier timeline than its previous forecast of quarter two (Q2) 2027. Markets currently price in one to two further quarter-point cuts in 2026, with base rate potentially settling in the 3.25% – 3.5% range by year end.
The European Central Bank (ECB), meanwhile, held its deposit rate at 2.0% at its February meeting. That said, renewed energy price pressures stemming from the Iran conflict have complicated the outlook for central banks globally.
Gold: Another Extraordinary Month
If January was remarkable for gold, February was extraordinary. After starting the month at approximately $4737 per ounce, gold experienced significant volatility in the first week before staging a powerful recovery, closing the month at $5278 a gain of 11.4% in just 30 days. The late-February surge was directly driven by the escalation of the US-Iran conflict, which sent investors scrambling for safe-haven assets.
Gold’s structural drivers remain strongly intact. A weakening US dollar, elevated geopolitical risk, and continued uncertainty around the trajectory of global interest rates all support the metal. Over the past year, gold has risen by more than 70%, an exceptional run that has rewarded investors willing to hold diversified, multi-asset portfolios. When converted back into sterling, the returns have been even more pronounced given relative currency movements.
The Benefits of Diversified Portfolio Management
February’s market performance was a powerful demonstration of the value of genuine diversification. Whilst the US equity market slipped modestly, portfolios with meaningful exposure to global equities and gold captured strong returns. The ongoing rotation in market leadership, away from concentrated US mega-cap technology positions toward broader global exposure has been a consistent theme since the start of 2026, and February reinforced it emphatically.
IG’s Smart Portfolios had another solid month, with the portfolios producing broadly positive returns across risk levels. Key contributors included European equities, gold, and international developed market exposure, all of which benefited from the dollar weakness and broader non-US equity momentum. The dramatic late-month gold surge, driven by the Iran conflict, provided a timely reminder of why holding safe-haven assets alongside growth-oriented positions can meaningfully reduce portfolio volatility in times of stress.