Knowledge Center
Market Currents – 2/13/26
- The Guard is Changing. For the better part of three years, the market’s rally has felt like a one-act show led by a small group of mega-cap technology companies. That script is now beginning to evolve. Through January and into early February, leadership has shifted away from the familiar giants and toward areas that had previously lagged. The market’s progress is becoming less about a narrow group of winners and more about broader participation. This is a healthy development. Durable bull markets are rarely built on a single theme, and this rotation reflects the type of market environment we have been preparing for by emphasizing diversification rather than following the crowded trade.
- Software Stocks Feel the Pressure. One of the most striking developments in recent weeks has been the sharp selloff across software stocks. For years, these companies were viewed as key beneficiaries of the artificial intelligence buildout. That narrative flipped overnight as new AI tools showed they could handle tasks that once required expensive enterprise software or dedicated teams. Investors are now asking a tougher question: What if AI does not just enhance these businesses, but reduces the need for some of their core offerings? Corporate technology budgets are finite, and dollars directed toward AI infrastructure must come from somewhere, leading to tighter scrutiny on traditional software spending.
- A New Face at the Fed. On January 30th, the White House nominated former Fed Governor Kevin Warsh to succeed Jerome Powell when his term ends in May. Warsh is a familiar presence at the central bank, having served on the Board during the 2008 financial crisis, and he is generally viewed as a credible and market friendly choice. While he has historically leaned toward tighter policy, recent comments suggest openness to rate cuts if productivity improves and inflation cooperates. Markets are currently pricing in one to two additional rate cuts this year, with timing dependent on how inflation and economic momentum evolve under the incoming leadership.
- Earnings Season: Solid, but the Bar Keeps Rising. Beneath the shifting headlines, corporate earnings remain the market’s foundation. We are now past the midpoint of fourth quarter reporting, and results have been broadly constructive. Roughly three-quarters of companies exceeded profit expectations, though the market’s reaction has grown more discerning. Overall, corporate profits are on track for a fifth straight quarter of double-digit growth, a sustained stretch of fundamental strength we have not seen in years. Looking ahead, expectations for 2026 remain optimistic, but with valuations elevated, the hurdle for positive surprises is high.
- Diversification is Doing Its Job. For some time now, we have maintained a measured underweight to the highest-flying technology stocks, not because we question their innovation, but because their tremendous run left little room for error. At the same time, we built exposure to companies that had been overlooked and underloved. In periods like this, that balance matters. Our approach remains consistent: diversify thoughtfully, trim positions where valuations move ahead of fundamentals and continually reassess risk. The early weeks of 2026 have brought shifting leadership and selective pressure in former market favorites, but this appears more like rotation than retreat. Markets evolve constantly, and our process is built to evolve with them. We thank you for your continued trust.