ALTERNATIVE MARKETS UPDATE – END FEBRUARY 2026

​At the end of last week, the US Supreme Court delivered a major legal rebuke to executive trade policy, ruling that President Trump exceeded his authority by imposing sweeping global tariffs under the International Emergency Economic Powers Act (IEEPA). The Supreme Court finds that the statute did not authorize broad tariff powers and therefore invalidating large portions of his tariff regime. In response, President Trump immediately pivoted to alternative statutory authorities, including a temporary global tariff of 10% - later increased to 15 % - under Section 122 of the 1974 Trade Act. This announcement signals further industry- and country-specific tariffs under national-security provisions, keeping trade policy uncertainty elevated. The legal clash and policy recalibration have fed deep political polarization over trade and economic strategy. Consequently, public polling shows substantial opposition to the tariff agenda and debate within both parties over statutory authority, executive power and economic priorities. These issues contribute to amplifying uncertainty in business confidence and strategic investment planning. These political dynamics intersect with broader economic signals that have diverged across the US economy. Manufacturing data show pockets of strength while consumer and business confidence remain subdued, and labour-market resilience coexists with weakness in investment and real incomes, underscoring the uneven impact of policy shifts and structural pressures on growth. Against this backdrop, market participants have increasingly adopted the “Sell America” narrative, a term describing sustained selling pressure on USD-linked assets amid perceived policy risk, with reallocation toward foreign equities, FX and alternative stores of value. The later is further boosted by geopolitical uncertainty.

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RESEARCH PERSPECTIVE VOL. 270 February 2026 Alternative Markets Update At the end of last week, the US Supreme Court delivered a major legal rebuke to executive trade policy, ruling that President Trump exceeded his authority by imposing sweeping global tariffs under the International Emergency Economic Powers Act (IEEPA). The Supreme Court finds that the statute did not authorize broad tariff powers and therefore invalidating large portions of his tariff regime. In response, President Trump immediately pivoted to alternative statutory authorities, including a temporary global tariff of 10% - later increased to 15 % - under Section 122 of the 1974 Trade Act. This announcement signals further industry- and country-specific tariffs under national-security provisions, keeping trade policy uncertainty elevated. The legal clash and policy recalibration have fed deep political polarization over trade and economic strategy. Consequently, public polling shows substantial opposition to the tariff agenda and debate within both parties over statutory authority, executive power and economic priorities. These issues contribute to amplifying uncertainty in business confidence and strategic investment planning. These political dynamics intersect with broader economic signals that have diverged across the US economy. Manufacturing data show pockets of strength while consumer and business confidence remain subdued, and labour-market resilience coexists with weakness in investment and real incomes, underscoring the uneven impact of policy shifts and structural pressures on growth. Against this backdrop, market participants have increasingly adopted the “Sell America” narrative, a term describing sustained selling pressure on USD-linked assets amid perceived policy risk, with reallocation toward foreign equities, FX and alternative stores of value. The later is further boosted by geopolitical uncertainty. Building on the backdrop of heightened political and geopolitical uncertainty, US equity markets have shown a muted performance in early 2026, with the Nasdaq-100 slightly negative YTD (as shown in Figure 1) and the S&P 500 similarly unable to extend gains, reflecting investor caution amid tariff volatility and macro risk. This risk aversion has been exacerbated by growing concerns around the trajectory of AI investment and disruption, which have become central drivers of equity market differentiation. Major technology firms are forecast to invest around $650 billion in AI infrastructure and related projects in 2026, a scale of capital expenditure that has spiked market anxiety about the trade-off between long-term capability building and near-term profitability. In reported quarterly results, elevated AI and cloud spending has pressured profit growth at several of these firms as expenses rise faster than revenue, undermining earnings momentum even as AI remains a strategic priority. Figure 1: Software Sector ETF (iShares Expanded Tech-Software Sector ETF) and Nasdaq-100 YTD 2026, Source: Investing & BlackRock, February 2026 This dynamic has fed a broader software equity sell-off, with software and services stocks recently underperforming the broader market by near-record margins as investors reassess the assumption that future AI gains will compensate for current valuations and expenditure. The sell-off has been particularly acute in sectors perceived as vulnerable to AI disruption. These include enterprise software names, which have seen steep price declines as the narrative shifts from broad digital transformation optimism to selective disruption risk, and analysts debate whether this represents a correction or structural transition. As shown in Figure 1, such software companies are nearly 30% in the first two months of the year. Within this theme, cybersecurity equities have been hit especially hard following announcements of new AI tools capable of automating code security and vulnerability detection. This news triggered sharp declines in stocks such as CrowdStrike, Zscaler and others as investors weighed the implications of AI replacing or reshaping traditional security business models. The US–Iran geopolitical standoff remains a key driver of market volatility as diplomatic and military tensions persist alongside ongoing nuclear negotiations in Geneva. Due to Iran’s central role in the Middle East and the spectre of potential conflict, the issue continues to influence asset pricing. US force posture in the region has been reinforced with significant military deployments amid diplomatic engagement, while Iranian domestic pressures and long-running friction over its nuclear ambitions add depth to the crisis. Markets have responded to this heightened geopolitical risk with a pronounced risk premium in energy prices, as crude benchmarks like Brent and WTI recently approached multi-month highs amid fears of disruption to flows through the Strait of Hormuz, a chokepoint for roughly one-fifth of global oil exports. This has translated into higher oil futures and freight costs, elevating input costs for energy-intensive sectors and feeding through to inflation expectations. Equities have also felt the impact, with increased uncertainty contributing to risk-off positioning at times and underpinning traditional safe haven demand, even as diplomatic developments have intermittently eased some pressures. STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Tallinn in Estonia and Dubai and Umm Al Quwain in United Arab Emirates. 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