PNC Capital Directions Portfolio and Performance Review 

• U.S. and International equities diverge in February: U.S. equities, as measured by the Russell 3000 index, posted a negative return of -0.48% for the month of February. After a strong start to the year, investors aggressively rotated out of the technology sector, as AI-driven businesses faced capital-intensive competitive pressure and business model disruption this past month.  Meanwhile, international equities shone brightly as the MSCI ACWI ex USA IMI index rose during the month, finishing up +5.05% with global markets decoupling from U.S.-led technology concentration.
• Precious metals continue to push higher: Investors aggressively moved into “safe haven” assets like gold, driven by uncertainties in trade and rising geopolitical fears.  The U.S. Supreme Court struck down the administration’s tariff framework, which led to the proposal of a new 15% blanket global tariff under a different law.  The last weekend of February shocked investors, with U.S. and Israeli military strikes in Iran, sending oil prices skyward. Fear-based trading sent gold to $5,400 per ounce over this past weekend along with oil prices spiking with disruption along the Strait of Hormuz.
• Borrowing costs fall as investors seek safety: U.S. investment grade fixed income posted a solid 1.64% return for the month, according to the Bloomberg US Aggregate Bond index.  The 10-year U.S. Treasury yield dipped briefly below the psychological 4.00% threshold as investors executed a “flight to quality,” moving capital out of volatile equity markets and into government bonds on the back of unfolding geopolitical uncertainties and softer-than-expected inflation data. Together with encouraging job gains in early 2026, an interest rate cut in March seems highly unlikely.
• Energy prices spike with Strait of Hormuz crisis: Oil prices underwent significant volatility in February. An unexpected surge of 16 million barrels during the week of February 20 had far exceeded expectations of a 1.2-1.85 million barrel increase. This was the largest increase in three years, attributed to lower refinery utilization and higher imports, but the short-lived price relief was quickly disrupted by military escalation in the Middle East. With shipping traffic restricted and the Strait of Hormuz effectively closed, a vital chokepoint handling 20% of global daily oil supply sent Brent crude near $80 per barrel at the end of February. This energy shock presents a potential headwind for global trade and particularly consumer-driven businesses given its potential for higher headline inflation.

• Emerging Markets Equities remained the top performer for another month, with the MSCI Emerging Markets index rising 5.50% in February
• The next best performer in the models was International Equity, which benefited from a 5.05% increase in the U.S. ACWI Ex USA IMI index
• U.S. Large Cap Value, as measured by the S&P 500 Value index, posted a solid showing in February as the index moved up by 2.27%

• U.S. Large Cap Growth was the primary relative detractor in the models, posting a difficult -3.44% return as measured by the S&P 500 Growth index - that due mostly to the “AI disruption” sell-off which heavily impacted technology company valuations
• U.S. Large Cap Blend faced some weakness due to concentrations in domestic technology, with the S&P 500 Index trailing -0.76% for February
• Although still positive, High Yield Bonds was another weak relative performer in the models, finishing the month with a modestly positive 0.16% return according to the ICE BofA US High Yield index

During the month of February, there were no changes to target asset allocation models in the program.

Within stocks, we continue to prefer a tactical overweight to U.S. markets versus non-U.S. developed markets for most portfolios, based on what we believe to be the relatively stronger position of the U.S. economy. As part of U.S. allocations, we still favor a tilt to higher-quality, dividend-paying growth stocks as well as lower volatility stocks, that for their potential to mitigate some downside.

In fixed income, we continue to prefer an intermediate duration (i.e., interest rate sensitivity) allocated to mostly higher quality, investment-grade bonds, as we expect slower economic growth over the near term. While some portfolios have positions in below-investment grade bonds, we have tactically underweighted this area (excluding some income-oriented portfolios).

For accounts following our multi-asset income-focused approach, we continue to allocate across asset classes with an eye towards higher distributions versus traditional, broad-based markets. We strategically favor areas such as large cap value stocks and high-yield bonds as well as alternative strategies, such as those which generate income with the use of derivatives.

We continue to diligently monitor the markets and your account, and we will keep you abreast of any changes to your portfolio allocation and investment selection that we deem appropriate so that you’re well positioned for what’s ahead.