Last week: Equities rollercoaster among rotation & earnings releases; BTC and Cryptos hit hard (-20%); PE (-7%)
WEEKLY TRENDS
Wild markets once again last week, starting with Equities hit by rotation when Value stocks are outperforming Growth stocks (sectors in favour include Hardware while Software are hit hard by the surge in Capex from AI related stocks). The DJ hit a 50000 ATH
Earnings releases triggered wild moves (Amazon ended the week at -11%, NovoNordisk at -20%, Paypal -23% and Wallmart at +10%, GSK at +17%, ArcelorMittal +11%). Q4 earnings so far are beating expectations (EPS growth at +11% vs +7% expected)
Technically the Nasdaq remained well below its 100day MA while the S&P bounced perfectly off its 100day MA
The US corporate spreads are higher (+20bps) driving Corporate Bonds prices lower when the UST yields remain roughly unchanged. The ECB and the MPC/BOE decided to leave their rates unchanged last week (there is a building momentum for a UK rate cut though) and the most awaited January US Non Farm Payrolls (job report) were not released as scheduled last Friday due to shutdown (to be released next Wednesday)
US Jan CPI to be released on Friday while Q4 earnings will continue to be published.
US curve steepening (2-10 years) unchanged at 71bps
HY corp. spreads higher: US at +297bps (+20bps); EU at +261bps (-3)
Commodities
Oil price lower (-2.5%) still dependent on the Hormuz straight situation
Gold price higher (+1.5%) Silver hit by a large fall (-30%) on paper markets yet physical in Shanghai trades at a huge premium ($120 vs $78 on Comex) due to extreme leverage (1.5bn oz vs 110m oz)
USD/JPY
Back at pre-FED rate check level ahead of Sunday’s elections (exp. landslide victory for PM Takaichi)
Crypto
BTC (-19%), ETH (-15%), SOL (-18%) highest volatility since the FTX crash
Under the watch
Mag 7 AI Capex: combined 2026 Mag 7 AI Capex at $660bn (up $60bn) overtaking shares Buybacks - transitioning from asset light to asset heavy
Nota Bene
Large Silver short position taken by a Chinese billionaire on Shanghai Futures (30000 contracts)
Software sector still trades at 8x ‘price to sales’ ratio (2019 low at 5.5x)
Macro data releases: US Jan NFP job report (11 Feb), Jan CPI (13)
WHAT ANALYSTS SAY
Edmond de Rothschild: US Tech, the calm above the storm
WisdomTree: Cryptos, a lookback at one of the largest forced liquidations
Fidelity: Tech stocks, why it pays to look beyond AI
Edmond de Rothschild AM, 6 February 2026
Author: Michael Nizard, Multi-Asset & Overlay Manager
Doubts about the colossal investment needs of AI have grown, leading to extremely severe penalties for the shares of US tech giants.
Behind the apparent resilience of global stock indices, a brutal sector rotation is underway, with the technology sector and the software segment in particular being the main victims.
Doubts about the colossal investment needs of AI, which were already present, grew this week and resulted in extremely severe penalties for the shares of US tech giants, despite the publication of good results.
Furthermore, the rise of Anthropic's new model and its impressive performance in generating computer code have fuelled concerns about the ability of software companies to cope, accentuating the sector's decline, which now stands at nearly -30% since last October's high. The correction has been particularly sharp in the segments most exposed to retail flows, which are now accumulating significant losses linked to the fall in crypto assets and are thus forced to unwind positions across all risky assets.
To a lesser extent, the appointment of Kevin Warsh as head of the Fed may also have weighed on momentum assets, given his calls for a structural reduction in the size of the Fed's balance sheet. In his view, the central bank's role should no longer be to inject liquidity into the financial markets, as this would contribute to inflating asset prices. While these comments raise questions about the Fed's future willingness to intervene in the event of market stress, Donald Trump's nominee nevertheless says he is in favour of further cuts in key interest rates in order to support financing conditions for businesses and households. However, the former Fed governor, known for his highly restrictive stance at the height of the subprime financial crisis, is no longer as concerned about inflationary pressures today, convinced that AI-driven productivity gains will generate strong non-inflationary growth.
In Europe, Christine Lagarde reiterated her message of confidence in the effectiveness of current monetary policy, despite inflation being well below the 1.7% year-on-year target. However, several ECB members highlighted the disinflationary impact of the sharp appreciation of the euro, a factor that needs to be monitored closely as it is contributing to tighter financial conditions in the eurozone. These conditions are already contributing to tighter credit standards, as evidenced by the BLS survey published this week.
Finally, investors will be closely watching the results of the Japanese general election this weekend, which is expected to strengthen Prime Minister Sanae Takaichi's parliamentary majority and even give her a two-thirds majority in the lower house, allowing her to bypass opposition in the upper house. If this is confirmed, the fiscal expansion programme is likely to be stepped up to stimulate nominal growth, a strategy that would penalise the yen and Japanese interest rates but could continue to support local equity markets.
We remain positive on the latter as well as on emerging markets within the equity class and continue to prefer short-term rates to the long end of the curve, as well as investment grade credit.
WisdomTree, 6 February 2026
Authors: Dovile Silenskyte, Cryptos Head of research
On Saturday, 31 January 2026, the crypto markets experienced a sharp correction, which was primarily technical in nature. It was one of the largest forced liquidations ever recorded, with more than US$2.5bn in leveraged positions automatically closed out in a short period of time.
It is important to note that this movement was not triggered by unfavourable news or a deterioration in the long-term investment outlook for digital assets. Rather, it reflected a mechanical chain reaction within the derivatives market. Many traders were heavily leveraged and positioned for further price increases. When prices fell slightly, margin thresholds were exceeded, triggering automatic liquidations. These forced sales drove prices down further, triggering new margin calls in a self-feeding loop.
Most of the activity took place in the derivatives markets, particularly perpetual futures contracts, rather than in the spot market, where investors directly purchase and hold cryptocurrencies. Funding rates had been positive for a long time, indicating overbought positioning.
Once key technical levels were breached, and with reduced liquidity over the weekend, automatic liquidations accelerated the decline.
This episode highlights a structural feature of cryptocurrency markets: short-term price dynamics remain heavily influenced by leveraged derivatives trading rather than long-term capital allocation decisions.
When leverage is high and liquidity is fragile, price movements can become exaggerated, especially outside normal trading hours. Such events are not new. Historically, cascades of large liquidations tend to eliminate excessive leverage, reset market positioning and, in some cases, improve the risk-return profile once volatility has subsided.
They also highlight an important distinction for investors:
· Leveraged derivatives are exposed to forced selling risk, as positions can be automatically closed out at unfavourable prices.
· Spot positions and exchange-traded products (ETPs) backed by physical assets are not subject to margin calls and are therefore not exposed to this type of mechanical liquidation risk.
In short, this was not a collapse of cryptocurrency fundamentals, but a predictable consequence of the collision between high leverage and low liquidity.
Short-term performance following these events has been mixed. However, on average, markets have tended to stabilize and recover over the longer term following major deleveraging episodes. That said, results vary considerably from one episode to another, and historical trends should not be interpreted as an indicator of future performance.
Fidelity International, 6 February 2026
Authors: Hyun Ho Sohn, Global Tech Fund Manager
In 2026, the technology sector will continue to undergo profound structural changes. AI continues to attract attention, but one question is becoming increasingly pressing: is the current high level of investment sustainable?
The fact is that high spending on AI infrastructure is driving demand for semiconductors, network technologies, and storage systems. But these investments also weigh on cash flow, lead to shortages of important components, and strain electrical infrastructure. Furthermore, at the beginning of major infrastructure cycles, capital is not always used efficiently, as companies seem to place more importance on the battle for market share.
AI usage continues to grow, but investment could decline. High capital expenditures are increasingly being financed by external capital. The sustainability of spending growth therefore depends largely on the ability to finance current deficits on a long-term basis, as well as on investor confidence.
Many AI companies, whose business is heavily driven by high capital expenditure, are currently generating above-average profits. Buoyed by very positive market sentiment, these stocks are trading at high valuations, which increases the risk of a price decline. Preference is therefore given to companies that have broadly diversified and recurring sources of revenue and are trading at reasonable valuations. In the context of AI, these are the major cloud computing providers (“hyperscalers”) and certain software and IT services companies.
Will AI soon be able to develop software code on its own and replace traditional software publishers? After in-depth discussions with companies and industry experts, the conclusion is that with the widespread adoption of AI, the importance of enterprise software and IT service providers is likely to increase rather than decrease. In this context, positions in certain stocks in this segment are being strengthened in a targeted manner. In addition, small and medium-sized software companies may be of interest to strategic buyers and private equity firms. Consolidation opportunities also exist in certain areas of IT services.
Global opportunities in Europe and emerging markets
Outside the US market, we currently see attractive investment opportunities in Europe and emerging markets. These include an Asian semiconductor manufacturer, a Chinese e-commerce and cloud computing service provider, and a European payment service provider with a highly efficient technology platform.
2026 opens up many opportunities
AI has considerable potential, while attractive opportunities are emerging in companies that are currently undervalued by the market. The software and IT services sector is considered to be significantly undervalued. Digital content and distribution platforms, for example for music and video games, also have solid business models. Payment services and IT solutions for banks are also interesting areas.
Ultimately, 2026 will show one thing: the technology sector is extremely diverse and offers many interesting investment opportunities, even beyond AI.
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